Opposition to U S Bank s Preliminary Objections 1

7/29/2019 Opposition to U S Bank s Preliminary Objections 1

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IN THE COURT OF COMMON PLEAS OF WASHINGTON COUNTY ,PENNSYLVANIA

Civil Division

COUNTY OF WASHINGTON,PENNSYLVANIA, on behalf of itself and allother similarly situated Pennsylvania Counties,

Plaintiff,

vs.

U.S. BANK NATIONAL ASSOCIATION,

Defendant.

Civil Action No.: 2011-7095

BRIEF IN OPPOSITION TO THEPRELIMINARY OBJ ECTIONS OF U.S.BANK NATIONAL ASSOCIATION TOPLAINTIFFS SECOND AMENDEDCOMPLAINT

CODE:

Filed on behalf of Plaintiff, County of

Washington, Pennsylvania and all othersimilarly situated Pennsylvania Counties

Counsel of Record for this Party:

D. AARON RIHN, ESQUIREPa. I.D. No.: 85752

ROBERT N. PEIRCE, III, ESQUIREPa. I.D. No.: 76130

ROBERT PEIRCE & ASSOCIATES, P.C.Firm I.D. 8392500 Gulf Tower, 707 Grant StreetPittsburgh, PA 15219(412) 281-7229

GARY E. MASON, ESQUIREWHITFIELD BRYSON & MASON LLP1625 Massachusetts Ave. NWSuite 605Washington, DC 20036

JASON S. RATHOD, ESQUIREWHITFIELD BRYSON & MASON LLP1625 Massachusetts Ave. NWSuite 605Washington, DC 20036

JONATHON W. CUNEO, ESQ.


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CHARLES LADUCA, ESQ.CUNEO GILBERT & LADUCA507 C Street, N.EWashington, D.C. 20002

DEBRA BREWER HAYESREICH AND BINSTOCK, LLP4265 San Felipe, Ste. 1000Houston, TX 77027Phone: (713) 622-7271


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TABLE OF CONTENTS

I. INTRODUCTION.. 1

II. FACTS ..................................................................................................................................3

A. The Pennsylvania Recording Laws and the Statutory Duty to Record ....................3B. The Mortgage Electronic Registration System, Inc. ................................................4C. U.S. Bank Did Not Record Assignments, Yet Claimed the Benefits of

Doing So...................................................................................................................7

III. LEGAL STANDARD ........................................................................................................10

IV. ARGUMENT .....................................................................................................................10

A. There is A Statutory Duty to Record Mortgage Assignments ...............................10

B. Plaintiff Has Standing for its Requested Declaratory and InjunctiveRelief ......................................................................................................................13

1. Plaintiff Has Standing Because the Injury it Alleges Touches on

Statutorily-Designated Areas of its Concern ....................................................14

2. Plaintiff Has Standing Because Defendants Conduct Has Impaired

the Countys Recording System and Deprived it of Fees and the

County Has a Duty to Protect Itself and the Public From This Harm ...............16

3. Plaintiff Has Standing Because Its Priority Rights as a Creditor Confer

Standing to Challenge the Perfection of MERS Mortgages Defendant

Represents as Perfected.....................................................................................18C. Plaintiff Has Named the Correct Defendant ..........................................................20

D. Plaintiff States a Claim for Unjust Enrichment .....................................................201. Defendant Benefited from Claiming Compliance with a Statute that

it Violated ..........................................................................................................21

2. Defendant Benefited in its Role as an RMBS Trustee by Using the

County Recorder to Claim that it Held Perfected Mortgages When

it Did Not...........................................................................................................22

3. Defendant Benefited by Using the County Recorder to Prosecute

Foreclosures When it Lacked the Authority to do so ........................................23

E. The Court Should Overrule the Objections for the Quiet Title Claim ...................271. This Court is an Appropriate Venue for Plaintiffs Quiet Title Claim .............29

2. Plaintiffs Quiet Title Claim Sufficiently Describes the Property ....................30

3. Plaintiff Has Alleged Sufficient Facts Showing the Securitization

Trustee Has Possession of the Documents Sought to be Recorded ..................32


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4. Plaintiff Does Not Need to Join Landowners as Necessary and

Indispensable Parties .........................................................................................34

F. Plaintiffs Requested Declaratory Judgment that U.S. Bank HoldsUnperfected MERS Mortgages and Requested Injunctive Relief toCompel Recordation of Corrective Mortgage Assignments is Sound ...................37

1. Transfer of the Note Requires Recordation of a Mortgage Assignment

for the Accompanying Mortgage to be Perfected .............................................37

2. Pennsylvania Law Requires that a Mortgage be Properly Recorded,

by Identifying the Actual Record Owner, to Impart Constructive

Notice ................................................................................................................39

3. MERS Mortgages Are Improperly Recorded for Defendants Purposes

and Fail to Provide Constructive Notice for Subsequent Noteholders .............40

4. Principles of Agency Law Prove the Validity of Plaintiffs, Not

Defendants, Position ........................................................................................42

5. Even Assuming, Arguendo, that the MERS Model is Valid, Trust

Depositors are not MERS Members ................................................................44

G. Defendant Lacked Authority to Foreclose in MERS Name and Following anAssignment from MERS, Necessitating Declaratory Relief to Assist in

Clearing Title and Correcting Plaintiffs Land Records ........................................45

1. MERS has Never Been a Real Party in Interest Able to Foreclose, or

Able to Assign a Right to Foreclose, and Therefore Such Foreclosures

Failed to Convey Title ......................................................................................45

2. Defendants Failure to ReciteAll Assignments in Foreclosure

Complaints Violated Pa. R.C. P. 1147(a)(1), Rendering Foreclosures it

Conducted Wrongful .........................................................................................45

3. Because Defendant Lacked Authority to Foreclose, Purchasers of

Foreclosed Properties from Defendant Lack Clear Title, Necessitating

the Declaratory and Injunctive Relief Plaintiff Calls for ..................................47

V. CONCLUSION ..........................................................................................................................49


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TABLE OF AUTHORITIES

CASES

Bain v. Metro. Mortg. Group, Inc., 285 P.3d 34 (Wash. 2012) .................................................... 41

Bank of N.Y. v. Silverberg, 86 A.D.3d 274 (N.Y. App. Div. 2011) .............................................. 25Barren v. Dubas, 295 Pa. Super. 443 (1982) ................................................................................ 34

Bell v. Twp. of Spring Brook, 30 A.3d 554 (Pa. Commw. Ct. 2011) ............................................ 10

Bellistri v. Ocwen Loan Servicing, Inc., 284 S.W.3d 619 (Mo. Ct. App. 2009) .......................... 25

Bevilacqua v. Rodriguez, 460 Mass. 762 (2011) ................................................................... passim

Borough of Wilkinsburg v. Horner, 88 Pa.Cmwlth. 594, 490 A.2d 964 (1985) ........................... 35

Brennan v. ShoreBrothers, 380 Pa. 283 (1955) ........................................................................... 28

Brown v. Simpson, 1834 WL 3218 (Pa. 1834) ............................................................................... 15

Bruker v. Burgess and Town Council of Borough ofCarlisle, 376 Pa. 330 (1954) ...................... 28

Cheesman v. Yurkanin, 73 Pa. D. & C. 378, (Ct. Com. Pl. Luzerne County 1950) ..................... 31

Columbia Gas Transmission Corp. v. Diamond Fuel Co., 464 Pa. 377 (1975) ..................... 34, 35

Com. v. Bank of Am., N.A., 2012 WL 6062747 (Mass. Super. Dec. 3, 2012) .............................. 47

Com. v. Sontarelli, 791 A.2d 1254 (Pa.Cmwlth 2002) ................................................................. 11

Com. v. Baker, 690 A.2d 164 (Pa. 1997) ...................................................................................... 13

County of Wash., Pa. v. U.S. Bank Nat. Ass'n,2012 WL 3860474

(W.D. Pa. Aug. 17, 2012) ....7, 26, 31

Cranberry Park Associates v. Cranberry Township Zoning Hearing Board, 751 A.2d 165

(Pa. 2000) .................................................................................................................................. 11

Custer v. Glessner, 68 Pa. Super. 60 (1917) .................................................................................. 15

Eaton v. Federal Nat'l Mortg. Ass'n, 969 N.E.2d 1118 (Mass. 2012) .......................................... 24Estey Co. v. Dick, 41 Pa. Super. 610 (1910) .................................................................................. 48

First Citizens Natl Bank, v. Sherwood,583 Pa. 466 (2005) .......................................................... 39

Franklin T'hip v. Commw. Dept. of Envtl. Res., 500 Pa. 1, 452 A.2d 718 (1982) ........................ 14

Fumo v. City of Philadelphia, 601 Pa. 322, 972 A.2d 487 (2009) ............................................... 14

Grace Bldg. Co. v. Parchinski, 78 Pa. Commw 187, 467 A.2d 94 (1983) ................................... 31

Hanson v. Berenfield, 24 Pa. D. & C 2d 361 (1961) .................................................................... 28

Hartzfeld v. Green Glen Corp., 380 Pa. Super. 513 (1989) .......................................................... 34

Hendricks v. U.S. Bank, N.A, No. 10-849-CH, June 6, 2011 (Mich. Washtenaw Co. Trial Ct.)...19

In re Gebco Inv. Corp., 641 F.2d 143 (3rd Cir.1981) .................................................................... 23

In re Idicula, 484 B.R. 284 (Bankr. S.D.N.Y. 2013) .................................................................... 26In re Lampe, 665 F.3d 506 (3d Cir.2011) ..................................................................................... 21

In re Lippold, 457 B.R. 293 (Bankr. S.D.N.Y. 2011) ................................................................... 26

In re T.J., 559 Pa. 118, 125-26, 739 A.2d 478 (1999) .................................................................. 14

Ind. Mortg. Co. v. MSTC Inv. Inc., 2008 WL 7414679(Pa. Com. Pl. Dec. 17, 2008) .................... 40

Indymac Bank, FSB v. Bey, 2002 WL 31082395 (Pa. Com. Pl. Sept. 12, 2002) .......................... 28

J ackson v. Mortg. Elec. Registration Sys., Inc., 770 N.W. 2d 487 (Minn. 2009)........................... 7

J ohnson v. Am. Standard, 607 Pa. 492, 8 A.3d 318 (2010) .......................................................... 14


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J P Morgan Chase Bank v. Zellin, 82 Pa. D. & C.4th 460 (Com. Pl. 2007) .................................. 19

J uarez v. Select Portfolio Servicing, Inc., 2013 WL 500868 (1st Cir. Feb. 12, 2013) ................. 25

Kelter v. American Bankers' Finance Co., 306 Pa. 483, 492, 160 A. 127 (1932) ........................ 26

Koch v. First Union Corp., 2002 WL 372939 (Pa. Com. Pl. Jan. 10, 2002) ................................ 20

Landmark Nat'l Bank v. Kesler, 289 Kan. 528 (2009) ................................................................... 37

Lerner v. Lerner, 954 A.2d 1229 (Pa. Super. Ct. 2008) ............................................................... 32

MacKubbin v. Rosedale Memorial Park, Inc., 413 Pa. 637, 198 A.2d 856 (1964) ...................... 31

Mancine v. Concord-Liberty Sav. and Loan Ass'n, 299 Pa. Super. 260 (1982) .............................. 17

McCaraher v. Commonwealth, 1842 WL 4901 (Pa. 1842) .......................................................... 16

Mechanicsburg Area School District v. Kline, 494 Pa. 476, 431 A.2d 953 (1981) ...................... 36

Montgomery County Recorder of Deeds v. MERSCORP, ---F.Supp.2d---, 2012 WL 5199361

(E.D.Pa. 2012).................................................................................................................... passim

Mortgage Elec. Registration Sys., Inc. v. Nebraska Dept. of Banking & Fin., 270 Neb. 529,

704 N.W.2d 784 (2005) ......................................................................................................... 24, 38

Mortgage Elec. Registration Sys., Inc. v. Saunders, 2010 ME 79, 2 A.3d 289 (Me. 2010) ............ 44Mortgage Elec. Registration Sys., Inc. v. Sw. Homes of Ark., 2009 Ark. 152, 301 S.W.3d 1

(2009) .................................................................................................................................. 40, 43

Naranjo v. SBMC Mortg., 2012 WL 3030370 (S.D. Cal., July 24, 2012) .................................... 24

Ninth Dist. Prod. Credit Assn v. Ed Duggan, 821 P.2d 788 (Colo. 1991) ................................... 23

Nudi v. Pine Township, 92 Pa.Cmwlth. 32, 498 A.2d 55 (1985) .................................................. 35

Nw. Sav. Assn v. Womer, 72 Pa. D. & C.2d 231 (Pa. Com. Pl. 1976) ......................................... 30

Orson, Inc. v. Miramax Film Corp., 79 F.3d 1358 (3d Cir. 1996) ................................................. 39

Pines Plaza Bowling, Inc. v. Rossview, Inc., 394 Pa. 124 (1958) ................................................. 46

Pines v. Farrell, 577 Pa. 564 (2003) ....................................................................................... passim

Pocono Pines Corp. v. Pa. Game Commn, 464 Pa. 17 (1975) .................................................... 34Podolak v. Tobyhanna Twp. Bd. of Supervisors, 37 A.3d 1283 (Pa. Commw. Ct. 2012) ............ 32

Prouty v. Marshall, 225 Pa. 570 (1909) .................................................................................. passim

Reichley v. North Penn School District, 113 Pa.Cmwlth. 528, 537 A.2d 391 (1988) .................. 35

Residential Funding Co. v. Saurman, 490 Mich. 877, 803 N.W. 2d 693 (2011) ........................ 19

Rinegard-Guirma v. Bank of America, N.A., 2010 WL 3945476 (D. Or. Oct. 6, 2010) ........ 25, 37

Rummings v. Bd. of Prob. & Parole, 18 Pa. D. & C.4th 278 (Com. Pl. 1992) ............................. 20

S. Fayette Twp. v. Com., 73 Pa. Cmwlth. 495 (1983) .................................................................... 17

Salter v. Reed, 15 Pa. 260 (1850)) ................................................................................................. 17

Schaeffer v. Frey, 403 Pa. Super. 560 (1991) ................................................................................. 14

Schenck v. K.E. David, Ltd., 446 Pa.Super. 94, 666 A.2d 327 (1995 ........................................... 21

Schott v. Westinghouse Elec. Corp., 259 A.2d 443 (1969) ............................................................ 27

Sherrer v. Lamb, 319 Pa. Super. 290, 294, 466 A.2d 163 (1983)................................................. 29

Siskos v. Britz, 567 Pa. 689 (2002) ............................................................................................... 28

Stone Crushed Partnership v. Kassab Archbold J ackson & OBrien, 908 A.2d 875 (Pa. 2006) 12

Sylvester v. Beck, 406 Pa. 607 (1962) ............................................................................................ 43

Sw. Homes of Ark.,2009 Ark. 152 (2009) ..................................................................................... 42


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U.S. Bank Nat. Ass'n v. Baber, 2012 OK 55, 280 P.3d 956 (Okla. 2012) .................................... 25

U.S. Bank Nat. Ass'n v. Ibanez, 458 Mass. 637 (2011) .................................................................. 26

U.S. Bank Nat. Ass'n v. Kimball, 2011 VT 81, 190 Vt. 210, 27 A.3d 1087 (2011) ...................... 26

U.S. Bank v. Mallory, 982 A.2d 986 (Pa. Super. Ct. 2009) .......................................................... 46

U.S. Bank, Nat. Ass'n v. Moore, 2012 OK 32, 278 P.3d 596 (Okla. 2012) .................................. 25

United States v. Lavin, 942 F.2d 177 (3d Cir. 1991) ...................................................................... 48

Walker County, Ala. v. U.S. Bank National Association, CV-2012-000046.00

(Cir. Ct. of Walker Co., Alabama) (Aug. 27, 2012) ...................................................................... 3

Wells Fargo Bank, N.A. v. Lupori, 2010 PA Super 205, 8 A.3d 919 (Pa. Super. Ct. 2010)... 24, 45

White v. Young, 409 Pa. 562 (1963).............................................................................................. 28

Wm. Penn Parking Garage, Inc. v. City of Pittsburgh,464 Pa. 168, 346 A.2d 269 (1975) ......... 14

Zerr v.Commonwealth, 131 Pa. Commw. 317 (1990) ................................................................ 34

STATUTES

1 Pa.C.S. 1903(a) ....................................................................................................................... 121 Pa.C.S.A 1921(a) .................................................................................................................... 39

13 Pa. Stat. 1201(35) ................................................................................................................. 38

13 Pa. Stat. 9102 ......................................................................................................................... 38

13 Pa. C.S.A. 9203(a) ................................................................................................................. 38

13 Pa. C.S.A. 9203(b) ................................................................................................................ 38

13 Pa. Stat. 9203(g) .................................................................................................................... 39

13 Pa. Stat. 9308(e) ............................................................................................................... 38, 39

16 Pa. Stat. 9731 ......................................................................................................................... 15

16 Pa. Stat. 9853 .......................................................................................................................... 17

21 Pa. Stat. 351 .................................................................................................................... passim21 Pa. Stat. 381, 385, 386, 387, 390, 391, 400, 401, 451 ........................................................ 13

212 Pa. Stat. 351 (2011) ................................................................................................... 4, 37, 39

42 Pa. C. S. 8152 ........................................................................................................................ 19

53 Pa. Stat. 7102, 7103 .............................................................................................................. 18

Act of April 1, 1863, P.L. 188, 1 ......................................................................................... 28, 32

Ark. Code Ann. 14-15-404 (Supp. 2007) .................................................................................... 42

Pa. Stat. 621-622 ........................................................................................................................... 4

UCC 102(a)(14) .............................................................................................................................. 6

UCC 8-102(a)(5) ............................................................................................................................. 6

OTHER AUTHORITIES

2 Standard Pennsylvania Practice 2d 11:6 ................................................................................. 30

4 Goodrich-Amram 2d 1061(a):2 .............................................................................................. 29

Goodrich-Amran 1006 (1975 Suppl) .......................................................................................... 30

2A C.J.S. Agency 129 (2003) ...................................................................................................... 43

76 C.J.S.Registers of Deeds 10(b); ............................................................................................. 15

Adam J. Levitin, Susan M. Wachter, Explaining the Housing Bubble, 100 Geo. L.J . 1177


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(2012) .......................................................................................................................................... 5

Blacks Law Dictionary 1375 (6th Ed. 1990) ............................................................................... 12

C. L. Peterson,Two Faces: Demystifying the Mortgage Electronic Registration System's

Land Title Theory, 53 Wm. & Mary L. Rev. 111, 128 (Oct. 2011) .............................................. 6

W.Warren, Cutting Off Claims of Ownership Under the Uniform Commercial Code, 30 U.

Chi. L. Rev. 469, 470 (1963) ..................................................................................................... 48

J. F. Dolan et al., Core Concepts of Commercial Law: Past, Present, and Future: Cases and

Materials 2(Thompson West, 2004) ......................................................................................... 48

R.K. Arnold,Yes, There is Life on MERS, 11 Prob. & Prop. 32, 36 (1997) ..................................... 4

Websters Third New International Dictionary 2085 (1993) ........................................................ 12

RULES

Pa. R. C. P. 17(a)..................................................................................................................... 24, 26

Pa. R. C. P. 1006 ..................................................................................................................... 30, 31

Pa. R. C. P. 1018 ........................................................................................................................... 20Pa. R. C. P. 1028(a)(5) .................................................................................................................. 34

Pa. R. C. P. 1061 ..................................................................................................................... 27, 28

Pa. R. C. P. 1061(b)(2) ................................................................................................................. 28

Pa. R. C. P. 1061(b)(3) ............................................................................................................ 27, 28

Pa. R. C. P. 1062 ........................................................................................................................... 29

Pa. R. C. P. 1065 ........................................................................................................................... 30

Pa. R. C. P. 1147 (a)(1) ........................................................................................................... 45, 46

Pa. R. C. P. 1705 ........................................................................................................................... 29

Pa. R. C. P. 2179 ..................................................................................................................... 29, 30


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I. INTRODUCTION

Defendant U.S. Bank National Association (U.S. Bank) has lodged preliminary

objections in this class action against it brought by the County of Washington, Pennsylvania, (the

County), on its own behalf and on behalf of and all other similarly situated Pennsylvania

Counties (collectively, the Counties). The essence of the Countys case is simple: U.S. Bank

must record mortgage assignments when mortgage notes are conveyed to it in the securitization

process because Pennsylvania statutory and equitable law require it.

Pennsylvania statutory law requires Defendant to record mortgage assignments in the

securitization process. Under the conspicuous heading NECESSITY OF RECORDING AND

COMPULSORY RECORDING, 21 Pa. Stat. 351 states that all . . . conveyances . . . shall be

recorded in the [relevant] office for the recording of deeds. The Pennsylvania Supreme Court has

said that a mortgage assignment is a conveyance that must be recorded.Pines v. Farrell, 577 Pa.

564, 576 (Pa. 2003). The Eastern District of Pennsylvania just months ago found that there is a

statutory duty to record as well, rejecting identical arguments to the contrary presented by

Defendant here. See Montgomery County Recorder of Deeds v. MERSCORP, ---F. Supp. 2d---,

No. 11-6968, 2012 WL 5199361 (E.D. Pa. Oct. 19, 2012). Defendant acts as trustee for

residential mortgage backed security (RMBS) trusts in which it has represented that all rights to

mortgage loans have been conveyed to it. Yet, Defendant has not recorded, or caused to be

recorded, mortgage assignments for such loans on mortgaged properties in Washington County

and throughout the Commonwealth of Pennsylvania. U.S. Bank is in plain violation of the law,

must make corrective recordations of mortgage assignments, and pay the County the necessary

recording fees.

The law of equity also requires Defendant to record the mortgage assignments. U.S. Bank


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at the time its RMBS trusts were created did not hold perfected mortgages, yet represented that it

possessed all the rights to certain mortgage loans attached to the properties deposited in the trust,

free and clear of any encumbrance. With these representations, it attracted investors to its RMBS

trusts because it could claim that its mortgages have priority over other competing liens on the

mortgaged properties, the right to foreclose on non-performing mortgages, favorable tax treatment,

insulation from the bankruptcy of other entities in the mortgage loans chain of title, and other

benefits. U.S Bank, however, did not record, or cause to be recorded, all mortgage assignments at

the time the trusts were created, nor did it pay the accompanying fees, which is to say, U.S. Bank

failed to perfect its interest in these mortgages and misled its investors about the perfection of these

mortgages. Rather, U.S. Bank merely transferred notes to the trusts it administered and recorded

the change in note ownership only in the records of Mortgage Electronic Registration Systems, Inc.

(MERS), a private corporation created for the express purpose of circumventing the payment of

mortgage assignment fees to county governments. Transfers within the MERS system are

insufficient to perfect the mortgage for the transferee. Absent a recording of a mortgages

assignment with the County Recorder of Deeds, the mortgage is unperfected in the hands of the

transferee.

In short, U.S. Bank failed to use the Countys recording services for the assignments

necessary for the securitization, yet it represented to the public and to RMBS investors that the

RMBS trusts had the benefit of perfected mortgages, a benefit that could only be obtained by using

the Countys services for recording assignment. U.S. Bank has greatly profited by falsely claiming

that it has obtained a benefit that only the County can provide; the County is willing to grant U.S.

Bank that benefit, but requires that U.S. Bank follow Pennsylvania law and pay for it like any other

citizen. Because it has not, U.S. Bank has unjustly received a benefit that it should not be allowed


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to retain. See Montgomery County, 2012 WL 5199361, at * 12 (finding claim stated for unjust

enrichment); See Walker County, Ala. v. U.S. Bank Natl Assn, No. 2012-000046.00 (Cir. Ct. of

Walker County, Alabama) (Aug. 27, 2012), attached hereto as Exhibit 1 (denying Defendants

motion to dismiss nearly identical complaint that contained unjust enrichment claim).

U.S. Bank registers the following preliminary objections to Plaintiffs Second Amended

Complaint (SAC): (1) there is no statutory duty to record mortgage assignments; (2) Plaintiff

lacks standing for its requested declaratory and injunctive relief; (3) Plaintiff has named the wrong

Defendant; (4) there is no claim for unjust enrichment because Defendant has received no benefit;

(5) Plaintiff fails to state a claim for quiet title because it lacks venue for putative class members,

because it did not adequately describe the land implicated, because Plaintiff has not alleged the

trustee has possession of the mortgage assignments sought to be recorded, and because necessary

and indispensable parties have not been joined; (6) the requested declaration, and accompanying

injunctive relief for corrective recordations of mortgage assignments, that MERS mortgages held

by Defendant are unperfected in the securitization process absent recorded mortgage assignments

to Defendant should be dismissed because they lack legal support; (7) the requested declaratory

relief that Defendant was not the real party in interest to prosecute foreclosures either in its name or

in MERS name lacks legal support. For the reason which follow, each of these arguments fail,

and all of U.S. Banks preliminary objections should be overruled.

II. FACTS

A. The Pennsylvania Recording Laws and the Statutory Duty to Record

As early as the 17th Century, American colonies passed property recordation statutes,

requiring a mortgagee (a lender who receives a mortgage as security for its loan) to record

mortgages and assignments of the mortgages or risk losing its ability to enforce the mortgage lien


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against a subsequent purchaser for value. SeeSAC, 9. Pennsylvania adopted its first recording

act in 1717, and it remains in force today. Id. at 10. Pennsylvania law dictates that mortgages

must be recorded within six months after they have been originated and that priority is determined

according to the date of recording. Pa. Stat . 621-622. Mortgage assignments must be in

writing and filed with a county recorder of deeds. Id. The fee for recording assignments shall be

governed by the fee bill in effect in the county in which such assignment is recorded. Id.at

623-624. In Washington County, the base fee is currently $52.50 per assignment. SAC, at 17.

Pennsylvania law requires that all deed, conveyances, contracts, and other instruments of

writing . . . shall be recorded in the office for the recording of deed in the county where such lands

. . . are located. 212 Pa. Stat. 351 (2011) (emphasis added). A mortgage assignment is a

conveyance that must be recorded.Pines, 577 Pa. at 576 ;Montgomery County, 2012 WL

5199361, at * 5 ([W]e conclude that all . . . conveyances . . . shall be recorded, 21 Pa. Stat.

351, means that all conveyances shall be recorded.). Defendant disagrees with this

interpretation and its arguments will be addressed below. Seeinfra IV.A.

B. The Mortgage Electronic Registration Systems, Inc.

Unlike the Commonwealths recording system, which was established by and for the

people of Pennsylvania, MERS is owned and operated by and for the mortgage industry.

[Former MERS CEO] R.K. Arnold,Yes, There is Life on MERS, 11 Prob. & Prop. 32, 36 (1997).

MERS was created in the mid-1990s by the mortgage industry to facilitate the growing

industry practice of selling residential mortgages for securitization in complex investment vehicles

known as residential mortgage backed securities (RMBS), which are generally issued by

specially-created RMBS trusts.1While RMBS have existed in their modern form since 1971 and

1 Defendant offers a rather charitable description of the positive impact of private mortgage securitization. SeeBriefIn Support of the Preliminary Objections of U.S. Bank National Association to Plaintiffs Second Amended


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were a robust market before the advent of MERS, the financial institutions involved in

securitization sought to add greater profitability to the securitization process. One way this was

accomplished was through the creation of MERS, which was formed for the express purpose of

avoiding fees traditionally due to county recorders of deeds when sales or assignments of

mortgages were made. SeeSAC, 32-35. In recent filings, MERS has affirmed that it exists to

eliminate the need for frequent, recorded assignments of subsequent transfers. Id.at 34.

Through MERS, RMBS trusts, including those for which Defendant U.S. Bank acts as

Trustee, circumvent county recording requirements. Id. at 39. RMBS trusts do not make loans

directly to consumers. Instead, they purchase loans that are originated by other financial

institutions. RMBS trusts and originating lenders are united through their common membership in

MERS. That is, MERS is used to facilitate the transfer of the mortgage (but not the promissory

note) to the trust through the following method. Id. At the loans origination, the originating

lender takes possession of the note,2 becoming holder of the note, and the borrower and lender

designate MERS (as the lenders nominee) to also serve as the mortgagee in the mortgage,

which is publicly recorded. Id. The secured interest of the lender (and lenders successors and

assigns) is, thus, allegedly held by MERS. Id. If the borrower were to default on the loan, MERS,

as the mortgagee, is allegedly authorized to foreclose on the home. Id. The loan information from

the mortgage is allegedly registered by the MERS member lender on the MERS system. Id. When

the note is sold, usually with an eye toward its eventual securitization, the note is transferred from

Complaint, pp. 2-3, Jan. 14, 2013 (Def. Br.). Plaintiff has suffered an injury entitling it to relief underPennsylvania law and is not here to put securitization on trial or litigate the recent financial crisis. Nevertheless, itbears mention that some commentators have reached a contrary conclusion about the desirability and impact of theprivate mortgage securitization industry. See, e.g., Adam J. Levitin, Susan M. Wachter, Explaining the HousingBubble, 100 Geo. L.J . 1177, 1181 (2012) (The primary cause of the housing bubble was the shift from regulated,government-sponsored securitization to unregulated, private securitization as the principal method of fundingmortgage loans.).2 Defendant asserts that its mortgage notes are negotiable instruments. SeeDef. Br., p. 2. No note is in the record,however, and, thus, discovery is needed to ascertain the veracity of Defendants factual statement.


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the original lender by an endorsement and delivery and MERS members are allegedly required to

update the MERS system to reflect the change in ownership. Id. Whether MERS records

accurately reflect these changes in ownership is uncertain. See Id.at 38, 46-51. According to

MERS, so long as the note has been transferred to a MERS member, the transaction allegedly does

not need to be recorded because, under the terms of the mortgage, MERS remains the original

mortgagee, as the nominee for the new beneficial owner of the note (the original lenders

successor and/or assign). Id. at 39.

MERS bears some resemblance to the Depository Trust Company (the DTC, also known

as CeeDee & Co.), which is the record holder of most public securities in the United States and

operates as a clearinghouse for most of the securities industry. The DTC, however, operates under

the statutory framework of UCC Article 8.3There is no equivalent statutory framework that

confines MERS; indeed there is no statutory authorization for MERS whatsoever, as was pointed

out by county recorders at the time of MERS formation. One recorder, for example, appropriately

contrasted the openness and reliability of the public record with the closed and incomplete nature

of MERS:

I am the official custodian of that database and everything that goes in there isrequired by Kentucky statutes that says this is what goes in that database that I amofficially responsible for, and I'm held accountable for that. If what I am officiallyresponsible for is the assignments then my next door neighbor is going to come into see his record of assignment . . . . Now, I can provide him access to that . . . . Thisshould be public record and all of a sudden it is no longer a public record. It's aninconclusive file. It went in this black hole called a clearinghouse.

C. L. Peterson,Two Faces: Demystifying the Mortgage Electronic Registration System's Land Title

Theory, 53 Wm. & Mary L. Rev. 111, 128 (Oct. 2011) (quoting R. Jackson, Clerk, J efferson Cty.,

Ky., Statement at National Association of Counties Legislative Conference: Mortgage Assignment

Issue Meeting 25 (Mar. 4, 1994)).

3 DTC is a clearing corporation under UCC 8-102(a)(5) and a securities intermediary under 8-102(a)(14).


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The unreliability of Defendants records in the wake of the mortgage industrys reliance on

MERS, rather than county recording offices, was highlighted earlier in this litigation. Defendant

removed Plaintiffs Complaint to federal court and Plaintiff moved for remand. In the lengthy

jurisdictional battle, Defendant was unable to produce adequate admissible evidence to show that

the amount-in-controversy would meet the minimum for the action to remain in federal court. The

Western District of Pennsylvania, in granting Plaintiffs Motion to Remand, characterized

Defendants records related to purported transfers as spotty and unreliable, adding that

[t]here is no guarantee of trustworthiness, to say the least. County of Wash., Pa. v. U.S. Bank

Nat. Ass'n, No. 11-1405, 2012 WL 3860474 (W.D. Pa. Aug. 17, 2012) report and

recommendation adopted, 2012 WL 3860438 (W.D. Pa. Sept. 5, 2012).The mortgage finance

industry, including Defendant, has popularized use of in the mortgage securitization process, even

though the MERS system has not been incorporated in state statutory schemes, with the exception

of Minnesota.4

C. U.S. Bank Did Not Record Assignments, Yet Claimed the Benefits of DoingSo

The Washington County Recorder of Deeds provides a service of promulgating legally

sufficient public notice of real property liens in exchange for a fee. SAC, 14. This service is

known as perfecting. Id. While an unperfected mortgage is enforceable by the mortgagee

against the borrower, it is not enforceable against a subsequent good faith purchaser for value or

other subsequently perfected liens. Id. That is, with perfected loans, the mortgagee has priority

over all other lienholders to seize the underlying collateral in the event of default to satisfy the debt

it is owed. These loans, in turn, can be securitized by major investment banking trustees, such as

Defendant, who attract investors by marketing the securities on their ability to enjoy favorable tax

4 Defendants brief referencesJ ackson v. Mortg. Elec. Registration Sys., Inc., 770 N.W. 2d 487 (Minn. 2009). SeeDef. Br., p. 6.The case is of no import here, however, because use of MERS is authorized by statute in Minnesota.


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treatment, insulation from the bankruptcy of other entities in the mortgage loans chain of title, and

other benefits. See Id.at 20-25. When Defendant oversees mortgage-backed securities trusts as

a trustee, it is able to charge premium prices to investors for its services. Id. at 23. At the root of

Defendants profit from overseeing MBS trusts, then, are the services of the county recorder.

In order for RMBS trusts to be properly formed and to enjoy the benefits of securitization,

there must be two true sales of the mortgage loans, which means that all rights to the mortgage

loans are transferred to the trust so that no upstream entity in the chain of title could claim control

of the assets in the event of bankruptcy. Id.at 20-28. The first sale must be to an RMBS trust

depositor and another from the trust depositor to the RMBS trustee. Id. at 22-25. To satisfy the

requirement of two true sales, all mortgage assignments from the originating lender to the

depositor to the trustee must be recorded. Id.at 26-31. Here, Defendant represented that all

rights had been so transferred. Id.

The contracts used by U.S. Bank to create trusts, known as Pooling and Service

Agreements or PSAs, contain express language to ensure that all rights to the mortgage loans have

been transferred to the trust, so that the transaction is considered a true sale and, accordingly,

bankruptcy-remoteness is achieved and the trust maximizes its ratings. Id. at 26. The express

language also ensures that the mortgage loan is secured, so that REMIC tax status is achieved. Id.

at 26-31. For example, the PSA for the trust that issued U.S. Banks MORTGAGE ASSET-

BACKED PASS THROUGH CERTIFICATES SERIES 2005-EFC3 contains the standard

definition of mortgage loan:

Mortgage Loans: Such of the mortgage loans transferred and assigned toU.S. Bank pursuant to Section 2.01 as from time to time are held or deemedto be held as a part of the Trust Fund, the Mortgage Loans originally so heldbeing identified in the initial Mortgage Loan Schedule, and QualifiedSubstitute Mortgage Loans held or deemed held as part of theTrustFundincluding, without limitation, each relatedMortgage Note, Mortgage and


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Mortgage File and all rights appertaining thereto.

SeeMortgage Asset-Backed Pass Through Certificates Series 2005-EFC3, p. 36 of 1830, attached

as Exhibit A to SAC (hereinafter referred to as PSA) (emphasis added) (SAC, at 26).

The PSA for MORTGAGE ASSET-BACKED PASS THROUGH CERTIFICATES

SERIES 2005-EFC3 also contains boilerplate warranties made by the Depositor:

(a) The Depositor, concurrently with the execution and delivery hereof, doeshereby assign to U.S. Bank without recourse all the right, title andinterest of the Depositor in and to (i) the Mortgage Loans. . . .

. . . The Depositor hereby represents and warrants to U.S. Bank for the benefit

of the Certificate holders that as of the Closing Date (or, if otherwisespecified below, as of the date so specified): (i) the information set forth inExhibit G-1 and Exhibit G-2 hereto with respect to each mortgage Loan orThe Mortgage Loans, as the case may be, is true and correct in all materialRespects at the respective date or dates which such information isfurnished; (ii) immediately prior to the conveyance of the MortgageLoans to U.S. Bank, the Depositor had good title to, and was the soleowner of, each Mortgage Loan free and clear of any pledge, lien,encumbrance or security interest (other than rights to servicing and relatedcompensation) andsuch conveyance validly transfers ownership of theMortgage Loans to U.S. Bank free and clear of any pledge, lien,encumbrance or security interest .

Id. at 26 (emphasis added).

The representations of the depositor are given integrity by the trustee, who investors are led

to believe is an independent and objective entity co-sponsoring the representations by closely

reviewing the trusts mortgage file and serving the trusts interests. The trustee acknowledges

receipt in the PSA of the mortgage loans in accordance with the depositors representations of

conveying perfected mortgages. SeePSA, at p. 67 (SAC, at 27). Further, the trustee is charged

with promptly reviewing each Mortgage File in the trust to ascertain that all required documents

have been executed and received. Id. at pp. 67-68 (SAC, at 27). Finally, if the trustee finds a

material defect in its review of the mortgage file then the trustee is to compel the depositor to


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repurchase the defective mortgage loans. Id. p. at 68 (SAC, at 27).

Despite its representations, Defendant did not record or cause to be recorded all mortgage

assignments and, without having done so, held only unperfected mortgages. SAC, at 28-31.

Transfers recorded solely within the MERS system are ineffective to give the transferee perfection

in the mortgage; perfection is obtainable only through a proper filing with the Washington County

Recorder of Deeds, which is the sole and definitive set of property records for the County.

Accordingly, Defendant should not have received the benefits of a perfected mortgage, including

the benefits that flow from securitization.

III . LEGAL STANDARD

A demurrer can only be sustained when the complaint clearly is insufficient to establish

the pleader's right to relief. Bell v. Twp. of Spring Brook, 30 A.3d 554, 557, n.7 (Pa. Commw.

Ct. 2011). A preliminary objection in the nature of a demurrer admits as true all well-pled

material, relevant facts and every inference fairly deducible from those facts. Id. Conclusions or

averments of law are not considered to be admitted as true by a demurrer. Id. Since the

sustaining of a demurrer results in a denial of the petitioner's claim or a dismissal of the suit, a

preliminary objection in the nature of a demurrer should be sustained only in cases that clearly

and without a doubt fail to state a claim upon which relief may be granted. Id. If the facts as

pleaded state a claim for which relief may be granted under any theory of law, there is sufficient

doubt to require the preliminary objection in the nature of a demurrer to be rejected. Id.

IV. ARGUMENT

A. There is a Statutory Duty to Record Mortgage AssignmentsThe Defendant argues that the Plaintiffs claims should be dismissed because 21 Pa. Stat.

351 does not impose a mandatory duty to record. This is false. The statutory language at issue


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could not be any clearer:

All deeds, conveyances, contracts, and other instruments of writing wherein itshall be the intention of the parties executing the same to grant, bargain, sell andconvey any lands, tenements, or hereditaments situate in this Commonwealth,

upon being acknowledged by the parties executing the same or proved in themanner provided by the laws of this Commonwealth, shall be recorded in theoffice for the recording of deeds in the county where such lands, tenements, andhereditaments are situate. Every such deed, conveyance, contract, or otherinstrument of writing which shall not be acknowledged or proved and recorded, asaforesaid, shall be adjudged fraudulent and void as to any subsequentbona fidepurchaser or mortgagee or holder of any judgment, duly entered in theprothonotarys office of the county in which the lands, tenements, orhereditaments 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 lawproviding for the lien of purchase money mortgages.

Id. (emphasis added). A mortgage assignment is a conveyance that must be recorded.Pines, 577

Pa. at 576.

The statutory interpretation of the word shall is a road well-traveled. The Defendant

would have this Court believe that the General Assemblys use of the term shall in this

provision was merely intended to indicate an option. It would have this Court read the shall as

a may. Such a reading would flout the rules of statutory construction and the well-established

jurisprudence of this Commonwealth. Contrary to the Defendants assertion, the term shall is

consistently recognized as signifying a statutory mandate. See e.g. Com. v. Sontarelli, 791 A.2d

1254, 1260 (Pa. Commw. 2002) (By definition, the word shall is mandatory; in ordinary

usage, the word shall means must and is inconsistent with the concept of discretion.);

Cranberry Park Assoc. v. Cranberry Twp. Zoning Hearing Bd., 751 A.2d 165, 167 (Pa.

2000)(the word shall denotes a mandatory, not permissive instruction.)

Pursuant to the Statutory Construction Act, [w]ords and phrases shall be construed


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according to their common and approved usage. 1 Pa. Cons. Stat. 1903(a). In the case of

shall, this means it should be interpreted as signifying a mandate. See e.g. Websters Third

New International Dictionary 2085 (1993) (listing the first definition of shall: 1a: will have to;

must.); Blacks Law Dictionary 1375 (6th Ed. 1990) (As used in statutes, contracts, or the like,

this word is generally imperative or mandatory . . . . The word in ordinary usage means must

and is inconsistent with a concept of discretion.).

The Federal District Court for the Eastern District of Pennsylvania just recently

considered this very issue, and determined that the term shall imposed a mandatory duty to

record. Montgomery County, 2012 WL 5199361, at * 5. The Montgomery County action is

nearly identical to this one, with the only significant difference being that Montgomery County

was proceeding directly against MERS, whereas these claims are being asserted against an

RMBS Trustee. In its Motion to Dismiss the action, Defendant MERS asserted the same

arguments currently being advanced by U.S. Bank, including no duty to record. In denying the

Motion to Dismiss, the court stated that the defendants attempts to read shall as may is not

permissible, and that all . . . conveyances . . . shall be recorded, 21 Pa. Stat. 351, means that

all conveyances shall be recorded. Id.

The Defendant would have this Court disregard theMontgomery County decision on the

basis that as a federal decision it is not binding precedent. While it is true that Federal District

Court decisions interpreting state law are not binding on this Court, it is equally true that such

decisions are generally regarded as persuasive authority. See e.g. Stone Crushed Pship v.

Kassab Archbold Jackson & OBrien, 908 A.2d 875, 883-887 (Pa. 2006). The analysis and

decision of the Eastern District in Montgomery County is thorough and sound, and serves as

good guidance to any court on this issue.


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The Defendant also argues that there have been some rare instances when courts in

Pennsylvania have interpreted shall as meaning may. In support, the Defendant citesCom. v.

Baker, 690 A.2d 164, 166-167 (Pa. 1997), in which the Pennsylvania Supreme Court stated that

it is the intent of the legislature which governs the interpretation issue. While it is

acknowledged that there are some rare instances in which shall could be interpreted as may,

the Baker Court itself recognized that statutory provisions containing the word shall are

usually considered to be mandatory, and indeed interpreted shall as being mandatory in its

own holding.

Even if this were one of those rare instances in which shall was used ambiguously, the

analysis of legislative intent urged by the Defendant reveals that it was intended to be mandatory

in this case. As explained by theMontgomery CountyCourt:

Even were the Defendants interpretation of the statute permissible, theLegislature clearly expressed its intent to make recording of conveyancescompulsory in other ways. Those statutes which permit recording of certain typesof documents all appear under the heading INSTRUMENTS SUBJECT TORECORD. See 21 Pa. Stat. 381, 385, 386, 387, 390, 391, 400, 401, 451. Incontrast, 21 Pa. Stat. 351, which makes recording of certain types of documentscompulsory, appears under the heading NECESSITY OF RECORDING ANDCOMPULSORY RECORDING.

Accordingly, we conclude that all . . . conveyances . . . shall be recorded, 21 Pa.Stat. 351, means that all conveyances shall be recorded. Even were an alternatereading permissible, the Legislatures organization of the statutes respectingrecording of different categories of documents shows that it intended preciselythis result. Dismissal on the basis is unwarranted.

Montgomery County, 2012 WL 5199361, at * 5.

B. Plaintiff Has Standing for its Requested Declaratory and Injunctive ReliefDefendants attacks on Plaintiffs standing for its declaratory and injunctive relief counts

fall short. SeeDef. Br., pp.24-29, 33. In general, the standard for standing is that a person who

is not adversely affected in any way by the matter he seeks to challenge is not aggrieved and,


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accordingly, lacks standing to obtain judicial resolution of the dispute. See Wm. Penn Parking

Garage, Inc. v. City of Pittsburgh, 464 Pa. 168, 190 (1975). A party can demonstrate that it has

been aggrieved if it can establish that it has a substantial, direct and immediate interest in the

outcome of the litigation. Fumo v. City of Phila., 601 Pa. 322, 336 (2009). The interest is direct

if there is a causal connection between the asserted violation and the harm complained of; it is

immediate if that causal connection is not remote or speculative. J ohnson v. Am. Standard, 607

Pa. 492, 510 (2010).

This general inquiry has been refined in the context of a government agency or political

subdivision, such a county, bringing suit. See In re T.J ., 559 Pa. 118, 125-126 (1999). In such

circumstances, when a government body has been invested with certain functions, duties, and

responsibilities, it has an implicit power to be a litigant in matters touching upon its concerns.

Id. (citingFranklin Thip v. Commw. Dept. of Envtl. Res., 500 Pa. 1 (1982). Franklin Township

is the paradigmatic example. There, the Pennsylvania Supreme Court found that the statutory

responsibilities of local government to protect and enhance the quality of life of its citizens

conferred standing to challenge state agencys issuance of permit for solid waste disposal within

local governments boundaries. See id.at 8-9.

Here, the County satisfies both the general and refined standing inquiries. It is an

aggrieved party with standing because the harm allegedly suffered not only touches on areas of its

statutorily-designated duties but is also of such severity that Plaintiff has a substantial, direct and

immediate interest in the outcome of the litigation. See id. at 8-9.

1. Plaintiff has standing because the injury it alleges touches on statutorily-designated areas of its concern

The county recorder is obligated to protect the public . . . in preserving the integrity of the

official records of his [or her] office. Schaeffer v. Frey, 403 Pa. Super. 560, 567-568 (1991)


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(quoting 76 C.J.S. Registers of Deeds 10(b)); see also Custer v. Glessner, 68 Pa. Super. 60, 61

(1917) (The recorder of deeds in each of the several counties of the Commonwealth is and has

been, almost since our beginning, an important county officer. He is elected by the people of the

county . . . [His records] are the history of the transactions of the people of the county affecting the

titles to land.). The recorder serves the public by recording deeds and similar instruments

presented at his or her office in a fair book, noting the day in which the instrument was brought

into the office, and indexing the records by the name of the grantor and the name of the grantee.

See16 Pa. Stat. 9731.

Further, the recording acts are intended to discourage secrets liens and trusts and protect the

rights of potential purchasers of properties that may have such hidden liens against them. See

Brown v. Simpson, 2 Watts, 233, at * 10 (Pa. 1834) (Secret liens or trusts are not to be encouraged

upon any species of property whatever; but in no case can such a thing prevail as to real estate

against an innocent purchaser of it for a full and valuable consideration without notice, unless our

recording acts are to be overturned and set aside.). In the absence of a system maintained by the

recorder in which the public can take notice and rely, no one would be safe in purchasing real

estate, or in loaning upon the strength of it, as security. Prouty v. Marshall, 225 Pa. 570, 574

(1909).

Defendant thinks otherwise of the recorder, calling its duties purely ministerial and likening

the position to that of an archivist, a preserver of historic documents who is not to make sure

what she has recorded has the effect intended by the parties to the document. SeeDef. Br., p. 28.

In reality, however, the county recorders office is more analogous to a database of health records

if the records are incomplete, inaccurate, or non-existent, the database decreases in value and may

be virtually worthless. There is a strong public interest in maintaining accurate land records.


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Further, county recorders role is not purely ministerial in the sense that the county recorders

have a duty to maintain clear, accessible land records and can be held personally liable for failing

to comply with this duty. See McCaraher v. Commw., 1842 WL 4901, at * 27 (Pa. 1842)

(affirming penalty imposed on recorder for failure to faithfully execute his duties in part because

of the significance of the office, which may be said to form the pivot on which all our titles to

real estate turn.).

2. Plaintiff has standing because Defendants conduct has impaired theCountys recording system and deprived it of fees and the County has aduty to protect itself and the public from this harm

At the core of the claims for declaratory and injunctive relief is Plaintiffs allegation that

Defendant received the full benefit of the county recorders imprimatur even though it did not

pay the full costs for this benefit. The requested relief would set the record straight, definitively

clarifying (1) whether Defendant can use a privatized system, MERS, rather than the recording

offices of Plaintiff, to perfect mortgage loans, and if not, whether Defendant should be ordered to

cause corrective assignments to be recorded since it has already claimed the benefits of holding

perfecting mortgages; (2) whether Defendant can leverage the false designation of MERS as

mortgagee in Plaintiffs recording office to foreclose in MERS name or foreclose following a

fraudulent, belated assignment from MERS when MERS has never been a noteholder.

Plaintiffs factual allegations, which at the demurrer stage are to be fully credited, are that

Defendants conduct in relation to these claims have, among other things, directly deprived it of

significant mortgage assignment fees, corrupted its land records, and placed clouds on the

property of the countys citizens, depressing the countys tax revenue and necessitating

significant services, time and expense from the Counties to determine ownership of properties.

SeeSAC, Nature of the Action; 53, 68-80, 90. Similar toFranklin Township, the county has a


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responsibility to preserve the integrity of its recorders official records and to enhance the quality

of life of its citizens by safeguarding the revenue it is entitled to collect and disperse on services

for its citizens.

Defendant goes to great lengths to argue that the recording acts are intended toonlybenefit

subsequentbona fidemortgagees and purchasers. Def. Br., pp. 26-27. Defendant is wrong. The

recording acts are also intended to benefit potential mortgagees and other interested parties or, in

other words, the public at-large. Indeed, the entry of recorded instruments in the aforementioned

indexes by the recorder is notice to all persons of the recording of the documents. 16 Pa. Stat.

9853; Prouty, 225 Pa. at 573 (stating that [t]he object of the recording acts is to give notice to the

world of ownership rights to, and incumbrances on, real estate); Mancine v. Concord-Liberty Sav.

and Loan Ass'n, 299 Pa. Super. 260, 264 (1982) (stating that the primary object of recording deeds

as stated by the Supreme Court isto give public notice in whom the title resides so that no onemay be defrauded by deceptious appearances of title.) (quotingSalter v. Reed, 15 Pa. 260, 263

(1850)).

Both the harm suffered, and Defendants argument on lack of standing, are similar to those

presented inS. Fayette Twp. v. Com., 73 Pa. Cmwlth. 495, 501 (1983). There, a township alleged

that it had not received its share of a tax levied on foreign fire insurance companies and sought a

mandamus order to compel state officials to insure the companies compliance with the relevant

statute and also requested an impoundment of foreign fire insurance premiums on funds to be paid

to certain municipalities, until the reporting companies complied with the statute. Id. at 499-500.

State officials argued that the statute indicated that the municipality has no discretion in

withholding the funds and is thus merely a conduit for the funds and, further, that firemans

associations, not the municipality, were the only party who suffered an injury. Id. at 501. The


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Commonwealth Court disagreed, finding that the township was not representing itself as the

fiduciary of the public interest with no express or implied mandate to do so, but rather, acting

pursuant to its statutorily prescribed responsibility to offer fire protection to its residents, which

conferred standing. Id. Here, too, the court should reject Defendants argument that the harm is

indirect and that the purported ministerial nature of the country recorders job prohibits the county

from filing suit, and find instead that Plaintiff is acting within its rights to remedy an injury it has

suffered, particularly as to its recorder who has been inhibited from faithfully executing her job.

3. Plaintiff has standing because its priority rights as a creditor conferstanding to challenge the perfection of MERS mortgages Defendant

represents as perfected

Defendant argues that the County needs to be a party to the mortgage loan or a third party

beneficiary to challenge the perfection of loans held by Defendant. SeeDef. Br., pp. 24-25. This

is wrong. Defendants conduct has obscured Plaintiffs priority rights as a tax lien creditor and

code violation creditor, thereby causing injury. Plaintiff has a sufficient stake in the outcome of

this case because the declaration that the MERS mortgages accompanying notes deposited in

Defendants trusts are unperfected will clarify the nature of its priority rights.

Under state statutes such as the Municipal Claims and Tax Liens Act (MCTLA), taxes on

real property by counties are a first lien on such real property (though subordinate to the lien of

taxes imposed by the Commonwealth). 53 Pa. Stat. 7102, 7103. Counties can make tax claims

and recover unpaid taxes by conducting judicial sales on the underlying properties. A judicial sale

can divest a mortgage, even if the mortgage is recorded before a tax becomes a lien, if the tax lien,

by law, has priority. See JP Morgan Chase Bank v. Zellin, 82 Pa. D. & C.4th 460, 464 (Pa. Com.

Pl. 2007) (By statute, with certain exceptions, a mortgage lien on real estate which is prior to all

other liens upon the same property is unaffected by a judicial sale of the property.) (citing 42


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Pa. Cons. Stat. 8152). Thus, if Plaintiff makes a tax claim and seeks to conduct a judicial sale on

property in which Defendant has a note accompanying a mortgage on the same property, then it is

critical to know whether Defendant has a perfected mortgage in the property. If Defendant does

not have a perfected mortgage because mortgage assignments were never recorded from an

originating lender to depositor to the Defendant then Plaintiffs sale will divest the mortgage. If,

however, Defendant does have a perfected mortgage, then the sale will not divest the mortgage and

the sale conducted by Plaintiff will yield much less money.

Because debtors who struggle to pay their taxes are likely to default on their loans as well,

it is far from speculative that Plaintiff will compete for priority with RMBS trusts such as those

overseen by Defendant. Indeed, in at least one instance, a debtor with a note attached to a

mortgage deposited in Defendants trust has been in foreclosure proceedings in the same year as

Plaintiff has sought to enforce a municipal lien. SeeExhibit 2, hereto (mortgage assignment from

LaSalle Bank to Defendant as successor trustee related to property in Washington County); Exhibit

3, hereto (list of actions against debtor specified in prior Exhibit. Note that case type number

041 is for municipal liens and case type number 026 is for foreclosures).5 Further, local

government units in Pennsylvania have competed with RMBS trustees for priority in similar

instances before. See, e.g., J P Morgan Chase Bank, 82 Pa. D. & C.4th at 463 (finding that bank

trustees mortgage was divested by sheriffs sale held by school district to satisfy unpaid school

taxes and stating that in reaching this conclusion the importance of promptly recording a

mortgage to preserve its priority and of correctly identifying the underlying statute pursuant to

5 Incidentally, U.S. Bank, as successor trustee, had a foreclosure sale declared void that was conducted in connectionwith a mortgage loan purportedly deposited in this trust. See Hendricks v. U.S. Bank, N.A, No. 10-849-CH, June 6,2011 (Mich. Washtenaw Co. Trial Ct.). SeeExhibit 4, hereto. The debtor prevailed on his argument that Defendantfailed to comply with the terms of the PSA. Id. at * 5-6. The Michigan Supreme Courts subsequent decision inResidential Funding Co. v. Saurman, 490 Mich. 877 (2011) does not disturb the Hendricks courts ruling as tocompliance with the PSA.


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which a tax sale is held cannot be overemphasized.). Clearly, then, Plaintiff has a concrete and

particularized interest in clarifying whether MERS mortgages held by Defendant are perfected.

C. Plaintiff Has Named the Correct DefendantDefendant protests that Plaintiff has named the Defendant in its individual capacity,

rather than in its capacity as a trustee and that this alleged misnomer merits dismissal of the

Complaint in its entirety. Def. Br., pp. 8-9. Defendants argument fails. It is abundantly clear

from the Complaint that Plaintiff has sued Defendant for conduct related to its role as a trustee of

various RMBS trusts. See, e.g., SAC at 6 (U.S. National Bank Association is the Trustee for

numerous trusts containing mortgage loans located in Washington County and other Counties in

Pennsylvania, including MORTGAGE ASSET-BACKED PASS THROUGH CERTIFICATES

2005-EFC3, which was attached to the Complaint). The naming of U.S. Bank, together with

the detailed descriptions of Defendants conduct as Trustee and the attachment of a PSA

describing Defendants representations as trustee, has put Defendant (in its capacity as trustee)

on notice of the existence of the claim and afforded it the opportunity to muster and preserve

evidence, which is all that is required by Pa. R.C.P. 1018 for identification of a proper

defendant. Koch v. First Union Corp., No. 100727, 2002 WL 372939 (Pa. Com. Pl. J an. 10,

2002) (quotingRummings v. Bd. of Prob. & Parole, 18 Pa. D. & C.4th 278, 279-280 (Pa. Com.

Pl. 1992).6

D. Plaintiff States a Claim for Unjust Enrichment

Defendant lodges a lone, narrow objection to Plaintiffs unjust enrichment claim,

6 Defendants insinuation that Plaintiff can only sue Defendant in its role as trustee for an individual trust, ratherthan over a set of trusts, is also misguided. Defendant has admitted that it uses a single Trustee ID number, ratherthan separate ID numbers, in MERS internal records for the trusts it administers. SeeSAC, at 53. Defendantsconduct demonstrates that it is a unitary actor in relation to the trusts it oversees, and should be held accountable assuch.


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conceding, in the process, that all but one element of the claim has been met. SeeDef. Br.,

pp.10-12. Defendant alleges that Plaintiff did not confer a benefit on Defendant. See id. It is

clear, though, that Defendant reaped the full benefits of Plaintiffs recording system even though

it made false statements to avoid paying the full costs of the system. On nearly identical

allegations, the Eastern District of Pennsylvania found that a claim for unjust enrichment was

stated by the Montgomery County recorder.

[T]he Plaintiff has successfully pleaded that the Defendants have enjoyed the fullbenefits of the recording system without paying the full value for these benefits inthe form of the fees properly due for each transfer of the beneficial interest of amortgage. (SeeCompl. 2629, 4145.) She has further successfully alleged

that the Defendants did so in violation of a statutory command to record suchassignments.See id.; Section IV.A supra.Because a plaintiff may recover whenit would be inequitable for the defendant to retain the benefit without paying fullvalue for it, In re Lampe, 665 F.3d 506, 520 (3d Cir.2011) (citingSchenck v.K.E. David, Ltd., 446 Pa. Super. 94, 666 A.2d 327, 328 (1995)) (emphasis added),these allegations state a viable unjust enrichment claim.

Montgomery County, 2012 WL 5199361, at * 12. Here, the benefits received by Defendant,

though it was not entitled to them, include: (1) compliance with 21 Pa. Stat. 351, (2) profit

generated from the formation of trusts that it oversaw on the basis that they held perfected

mortgages, and (3) the ability to conduct foreclosures.

1. Defendant benefited from claiming compliance with a statute that itviolated

Defendant received the benefit of compliance with a state statute, even though it violated

the statute. In the securitization process, mortgage loans are typically conveyed at least three

times, and must be conveyed at least two times. SeeSAC, at 22-31. By law, these

conveyances must be recorded with the county recorder as mortgage assignments, and mortgage

assignment fees must be paid. See id., at 16-17. Defendant, however, did not record, or cause

to be recorded, these mortgage assignments, nor did it pay assignment fees. See id., at 31.

Defendants flouting of the law enabled it to retain funds that belonged to the county.


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2. Defendant benefited in its role as an RMBS trustee by using the countyrecorder to claim that it held perfected mortgages when it did not

It is self-evident that U.S. Bank has profited by acting as an RMBS trustee. Defendant

does not run a charity, after all. Cf. Montgomery County,2012 WL 5199361, at * 12, n. 18

(The Defendants' actions on this point speak louder than their arguments before this Court. If

recording conveyed no benefits, then MERS would not exist.). That is, Defendant claimed the

benefit of representing that its trusts held perfected mortgages, allowing it to reap profits from its

role as trustee, but did not make the recordings necessary to lawfully make such representations.

SeeSAC at 16, 28-31. Mortgage securitization is a highly structured process in which certain

preconditions are necessary to the formation of an RMBS trust. Specifically, there must be at

least two true sales, which entails the transfer of all rights to perfected mortgages, to ensure the

essential features (including bankruptcy-remoteness and favorable tax treatment) of an RMBS

that render investment in it attractive relative to other options. See id., at 22-25. The high

value of the trusts created by these features has enabled Defendant to charge premium prices to

investors for its services as Trustee, a tangible benefit if there were any. See id., at 23. Put

simply, the fruits (profits) from Defendant overseeing RMBS trusts stem from the poisoned tree

of running a deceptive scheme on the county and its recorder.

Defendant now argues, however, through selective excerpts, that it made no

representations about the perfection of mortgages and, accordingly, received no benefit. See

Def. Br., pp. 4-5, 10-14. Rather, Defendant argues, it was the Depositor who made the

representations and sold the certificates and, further, that the PSA purportedly disclaims the

trustees responsibility concerning the mortgage loans and MERS. See id. Not so. Investors are

attracted to RMBS trusts because of the representations made in the PSAs and because the

representations are co-sponsored and given integrity by the trustee.


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That is, the trustee, who investors are led to believe is an independent and objective entity,

acknowledges receipt in the PSA of the mortgage loans in accordance with the depositors

representations of conveying perfected mortgages. SeePSA, at p. 67. Further, the trustee is

charged with promptly reviewing each Mortgage File in the trust to ascertain that all required

documents have been executed and received. Id. at 67-68. Finally, if the trustee finds a

material defect in its review of the mortgage file including, presumably, the absence of perfected

mortgages that form the basis for the RMBS trusts then, the trustee is to compel the depositor to

repurchase the defective mortgage loans. Id. at 68. These duties are why the Trustee is paid and

nothing in the PSAs that Defendant points to can disclaim this reality. Without the assurances that

the trustee supplies to securitization about reviewing mortgage files to ensure the presence of

perfected mortgages, investors would look elsewhere. Here, however, Defendant made the

representations of holding perfected mortgages necessary to attract the investors, receiving the

benefits of acting as an RMBS trustee, but did not record the necessary mortgage assignments nor

pay the necessary fees. On such facts, a claim for unjust enrichment is stated. See Montgomery

County, 2012 WL 5199361, at * 12;cf. In re Gebco Inv. Corp.,641 F.2d 143, 148 (3rd Cir. 1981)

(finding under Pennsylvania law that an unjust enrichment claim was stated when the

subcontractors were not paid and their efforts increased the value of the mortgaged property);

Ninth Dist. Prod. Credit Assn v. Ed Duggan, 821 P.2d 788, 797-798 (Colo. 1991).

3. Defendant benefited by using the county recorder to prosecuteforeclosures when it lacked the authority to do so

Finally, Defendant benefited by prosecuting foreclosures when it lacked the legal authority

to do so by leveraging the false designation of MERS as mortgagee in county records to paper

over Defendants lack of authority. On behalf of its trusts, Defendant prosecuted foreclosures in

the name of MERS, or after fraudulently directing an assignment from MERS, even though MERS


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has never had the right to foreclose. Pennsylvania law requires that the plaintiff in a civil action,

including a foreclosure proceeding, be the real party in interest. SeePa. R. Civ. P. 17(a); Wells

Fargo Bank, N.A. v. Lupori, 2010 Pa. Super. 205, 8 A.3d 919, 922, n.2 (Pa. Super. Ct. 2010).

Yet, MERS has never been the real party in interest because it has never been a noteholder, which

would entitle it to the benefits of a foreclosure. SeeSAC, at 69; Mortgage Elec. Registration

Sys., Inc. v. Neb. Dept. of Banking & Fin., 270 Neb. 529, 533 (2005) (MERS argues that it does

not own the promissory notes secured by the mortgages and has no right to payments made on

the notes.). For years, U.S. Bank prosecuted foreclosures by naming MERS as the plaintiff in

foreclosure proceedings until adverse precedent prompted MERS to change its membership rules

and prohibit its members from prosecuting in its name, which is telling enough. SeeSAC, at 71.

Defendants new method is equally faulty. See id. at 72. Now, when U.S. Bank wishes

to foreclose, it has an employee become a MERS official by filling out a short website form,

causes a mortgage assignment from MERS (signed by the latest MERS official who is, actually, a

U.S. Bank official) to U.S. Bank to be recorded, which Defendant presents as a self-authenticating

public record to prosecute foreclosures against bewildered homeowners. See id.at 47-49, 72.

One critical flaw (of many)7 in this method is that if MERS never had the right to foreclose

(because it has never been a noteholder) then it has no right of foreclosure to assign to Defendant.

See id.at 75; Eaton v. Fed. Nat'l Mortg. Ass'n, 969 N.E.2d 1118, 1134 (Mass. 2012) (finding

7 Two other crippling flaws stick out. First, these mortgage assignments were made and recorded after the closing date

set forth in Defendants trusts, which prohibits entry of any documents in the mortgage file after the date has passed.See SAC, at 75; Naranjo v. SBMC Mortg.,No. 11-2229, 2012 WL 3030370, at * 3 (S.D. Cal. July 24, 2012) (Thevital allegation in this case is the assignment of the loan into the WAMU Trust was not completed by May 30, 2006as required by the Trust Agreement. This allegation gives rise to a plausible inference that the subsequentassignment, substitution, and notice of default and election to sell may also be improper. Defendants wholly fail toaddress that issue . . . . This reason alone is sufficient to deny Defendants' motion with respect to this issue.Second, even assuming, arguendo, that MERS held a right to foreclose, the original mortgage states that MERS is thenominee of the originating lender. SeeSAC at 72. No written document exists establishing an agency relationshipamong originating lenders, MERS, and Defendant that would allow Defendant to direct MERS to record a mortgageassignment without the originating lenders permission, as Defendant has systematically done. See id., at 72-76.


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MERS assignment insufficient to confer power to foreclose); Bevilacqua v. Rodriguez, 460

Mass. 762, 772 (2011) (finding that because U.S. Bank lacked authority to foreclose in the first

instance it could not transfer property to subsequent purchaser); Rinegard-Guirma v. Bank of

Am., N.A., No. 10-1065, 2010 WL 3945476, at * 4 (D. Or. Oct. 6, 2010) (noting that other

courts have held that MERS does not have authority to transfer the note and finding that

homeowner was likely to succeed in challenge to securitization trustee's authority to foreclose);

Bank of N.Y. v. Silverberg, 86 A.D.3d 274, 283 (N.Y . App. Div. 2011) (holding MERS lacked

authority to assign power to foreclose because it was not holder or assignee of the notes);

Bellistri v. Ocwen Loan Ser., Inc., 284 S.W.3d 619, 621 (Mo. Ct. App. 2009) (finding MERS's

attempt to transfer mortgage and any and all notes secured by the mortgage ineffective because

MERS was not the noteholder and there was no evidence that the noteholder authorized MERS

to transfer the note).

Plaintiff has alleged that Defendant would not have been able to present adequate evidence

to foreclose had it not manufactured these fraudulent mortgage assignments, which is consistent

with the many cases in which Defendant failed to present satisfactory evidence to show standing to

foreclose when pressed by judges. SeeSAC at 112;J uarez v. Select Portfolio Ser., Inc., No.

11-2431, 2013 WL 500868, at * 5-8 (1st Cir. Feb. 12, 2013) (finding that homeowner stated

claim for defendants failure to show standing to foreclose on basis of backdated assignment to

U.S. Bank); U.S. Bank Nat. Ass'n v. Baber, 2012 OK 55, 280 P.3d 956, 957-959 (2012) (finding

that Defendant had not presented adequate evidence of standing to foreclose and stating that it

is a fundamental precept of the law to expect a foreclosing party to actually be in possession of

its claimed interest in the note, and to have the proper supporting documentation in hand when

filing suit .); U.S. Bank, Nat. Ass'n v. Moore, 2012 OK 32, 278 P.3d 596, 601-602 (2012),


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reh'g denied(May 24, 2012) (same); In re Idicula, 484 B.R. 284, 287-289 (Bankr. S.D.N.Y.

2013) (finding that U.S. Bank lacked standing to foreclose); U.S. Bank Nat. Ass'n v. Kimball, 190

Vt. 210, 217-218 (2011) (finding that U.S. Bank lacked standing to foreclose and noting that

[i]nitially, U.S. Bank's suit was based solely on an assignment of the mortgage by MERS.);

U.S. Bank Nat. Ass'n v. Ibanez, 458 Mass. 637, 650 (2011) (finding that foreclosure sales were

invalid because Defendant could not present proof to show authority to foreclose); In re Lippold,

457 B.R. 293, 298-299 (Bankr. S.D.N.Y. 2011) (finding that U.S. Bank lacked standing to

foreclose).8 Plaintiffs conclusion that Defendant would have grave difficulty in foreclosing but

for manufacturing fraudulent evidence is further supported by the sorry state of Defendants

records as a result of its use of MERS. See County of Washington, Pa., 2012 WL 3860474,

report and recommendation adopted, 2012 WL 3860438 (characterizing Defendants records

related to purported transfers as spotty and unreliable, adding that [t]here is no guarantee of

trustworthiness, to say the least.).

Defendant attempts to shrug off MERS lack of authority to foreclose, and lack of authority

to assign a right to foreclose, by selectively excerpting language purportedly granting such

authority from the form contract that homeowners sign with originating lenders. SeeDef. Br., pp.

7, 21. Pennsylvania law has long recognized that [c]ourts will not be controlled by the

nomenclature the parties apply to their relationship. Kelter v. Am. Bankers' Fin. Co., 306 Pa.

483, 492 (1932). Accordingly, Defendant cannot disclaim its legal responsibility to comply with

Pa. R. C. P. 17(a), requiring that foreclosures be prosecuted by the real party-in-interest, and the

state statute of frauds, requiring that purported agency relationships concerning real property be

8 Plaintiff has alleged that the mortgage notes were deposited in Defendants RMBS trusts. Defendant could presentnotes in foreclosure proceedings to assist it in prosecuting foreclosures. As the cases enumerated above show,however, notes, following deposit in the trusts, were later lost or destroyed, necessitating Defendants scheme toforeclose in MERS name or manufacture fraudulent evidence through improper use of Plaintiffs recording office.


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committed to writing. As such, Defendants argument is unpersuasive.

In short, U.S. Bank failed to use the Countys recording services for the assignments

necessary for the securitization, yet it represented to the public and to RMBS investors that it had

the benefit of perfected mortgages, a benefit that could only be obtained by using the Countys

services for recording assignment. U.S. Bank has greatly profited by falsely claiming that it has

obtained a benefit that only the County can provide; the County is willing to grant U.S. Bank that

benefit, but requires that U.S. Bank pay for it like any other citizen. Courts in Pennsylvania refuse

to sustain preliminary objections on unjust enrichment claims unless they are free and clear

from doubt that the law denies recovery. See, e.g., Schott v. Westinghouse Elec. Corp., 259 A.2d

443, 449 (Pa. 1969). On the facts set forth above and in the Second Amended Complaint, this

court cannot say without doubt that Plaintiff cannot establish an unjust enrichment claim. Thus,

Defendants preliminary objections should be overruled.

E. The Court Should Overrule the Objections for the Quiet Title ClaimPlaintiffs quiet title claim under Rule 1061 was brought in the appropriate venue,

sufficiently described the land at issue, alleged facts sufficient to show securitization trustee has