The United States Court of Appeals for the Third Circuit recently reversed a lower court and found that Mortgage Electronic Registration Systems Inc. (“MERS”) does not violate Pennsylvania’s recording law.  See Montgomery Cnty., Pa. v. MERSCORP Inc., 795 F.3d 372 (3d Cir. 2015).  In the case, a Pennsylvania county recorder sued MERS, alleging that MERS violated 21 P.S. § 351, which states that “[a]ll deeds, conveyances, contracts, and other instruments of writing wherein it shall be the intention of the parties executing the same to grant, bargain, sell, and convey any lands, tenements, or hereditaments situate in this Commonwealth . . . shall be recorded in the office for the recording of deeds in the county where such lands, tenements, and hereditaments are situate.”  The United States District Court for the Eastern District of Pennsylvania granted the recorder’s request for a declaratory judgment, holding that the “shall be recorded” language made the statute mandatory and that “Defendants’ failure to create and record documents evincing the transfers of promissory notes secured by mortgages on real estate in the Commonwealth of Pennsylvania is, was and will in the future be, in violation of the Pennsylvania Recording law[.]”  On appeal, the Third Circuit reversed the decision, finding that the statute did not require every conveyance to be recorded.  Instead, it noted that the statute addresses only bona fide purchasers, and found that a conveyance “shall be recorded” or else the party “risks losing his interest in the property to a bona fide purchaser.”  The statute does not require all conveyances to be recorded, however.  This decision followed the holdings of the Seventh and Eighth Circuits, which likewise held that MERS did not violate similarly-written recording statutes.  See Union Cnty., Ill. v. MERSCORP, Inc., 735 F.3d 730 (7th Cir. 2013); Cnty. of Ramsey v. MERSCORP Holdings, Inc., 776 F.3d 947 (8th Cir. 2014).

The analysis of the District Court’s 2014 decision can be found by clicking here.

For a copy of the decision, please contact Michael O’Donnell at modonnell@riker.com.