IN THE COURT OF COMMON PLEAS OF WASHINGTON COUNTY, PENNSYLVANIA Civil Division COUNTY OF WASHINGTON, PENNSYLVANIA, on behalf of itself and

all other similarly situated Pennsylvania Counties, Plaintiff, vs. U.S. BANK NATIONAL ASSOCIATION, Defendant. Civil Action No.: 2011-7095 BRIEF IN OPPOSITION TO THE PRELIMINARY OBJECTIONS OF U.S. BANK NATIONAL ASSOCIATION TO PLAINTIFFS SECOND AMENDED COMPLAINT CODE: Filed on behalf of Plaintiff, County of Washington, Pennsylvania and all other similarly situated Pennsylvania Counties Counsel of Record for this Party: D. AARON RIHN, ESQUIRE Pa. I.D. No.: 85752 ROBERT N. PEIRCE, III, ESQUIRE Pa. I.D. No.: 76130 ROBERT PEIRCE & ASSOCIATES, P.C. Firm I.D. 839 2500 Gulf Tower, 707 Grant Street Pittsburgh, PA 15219 (412) 281-7229 GARY E. MASON, ESQUIRE WHITFIELD BRYSON & MASON LLP 1625 Massachusetts Ave. NW Suite 605 Washington, DC 20036 JASON S. RATHOD, ESQUIRE WHITFIELD BRYSON & MASON LLP 1625 Massachusetts Ave. NW Suite 605 Washington, DC 20036 JONATHON W. CUNEO, ESQ.

CHARLES LADUCA, ESQ. CUNEO GILBERT & LADUCA 507 C Street, N.E Washington, D.C. 20002 DEBRA BREWER HAYES REICH AND BINSTOCK, LLP 4265 San Felipe, Ste. 1000 Houston, TX 77027 Phone: (713) 622-7271

TABLE OF CONTENTS I. II. INTRODUCTION.. 1 FACTS ..................................................................................................................................3 A. B. C. The Pennsylvania Recording Laws and the Statutory Duty to Record ....................3 The Mortgage Electronic Registration System, Inc. ................................................4 U.S. Bank Did Not Record Assignments, Yet Claimed the Benefits of Doing So...................................................................................................................7

III. IV.

LEGAL STANDARD ........................................................................................................10 ARGUMENT .....................................................................................................................10 A. B. There is A Statutory Duty to Record Mortgage Assignments ...............................10 Plaintiff Has Standing for its Requested Declaratory and Injunctive Relief ......................................................................................................................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.....................................................................................18 C. D. Plaintiff Has Named the Correct Defendant ..........................................................20 Plaintiff States a Claim for Unjust Enrichment .....................................................20 1. 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 ...................27 1. 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 i

4. Plaintiff Does Not Need to Join Landowners as Necessary and Indispensable Parties .........................................................................................34 F. Plaintiffs Requested Declaratory Judgment that U.S. Bank Holds Unperfected MERS Mortgages and Requested Injunctive Relief to Compel 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 an Assignment 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 Recite All 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) .............................................. 25 Barren 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. Shore Brothers, 380 Pa. 283 (1955) ........................................................................... 28 Brown v. Simpson, 1834 WL 3218 (Pa. 1834) ............................................................................... 15 Bruker v. Burgess and Town Council of Borough of Carlisle, 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) .......................................... 24 Estey 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) .................................................................... 26 In 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 Jackson v. Mortg. Elec. Registration Sys., Inc., 770 N.W. 2d 487 (Minn. 2009)........................... 7 Johnson v. Am. Standard, 607 Pa. 492, 8 A.3d 318 (2010) .......................................................... 14 iii

JP Morgan Chase Bank v. Zellin, 82 Pa. D. & C.4th 460 (Com. Pl. 2007).................................. 19 Juarez 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) ............ 44 Mortgage 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) .................................................... 34 Podolak 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 Jackson & 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 iv

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) ....................................................................................................................... 12 1 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 .................................................................................................................... passim 21 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 v

(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 ........................................................................................................................... 20 Pa. 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

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

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

against a subsequent purchaser for value. See SAC, 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. See infra 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.1 While RMBS have existed in their modern form since 1971 and

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

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. See SAC, 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 under Pennsylvania law and is not here to put securitization on trial or litigate the recent financial crisis. Nevertheless, it bears mention that some commentators have reached a contrary conclusion about the desirability and impact of the private mortgage securitization industry. See, e.g., Adam J. Levitin, Susan M. Wachter, Explaining the Housing Bubble, 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 funding mortgage loans.). 2 Defendant asserts that its mortgage notes are negotiable instruments. See Def. Br., p. 2. No note is in the record, however, and, thus, discovery is needed to ascertain the veracity of Defendants factual statement.

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 8.3 There 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 is required by Kentucky statutes that says this is what goes in that database that I am officially responsible for, and I'm held accountable for that. If what I am officially responsible for is the assignments then my next door neighbor is going to come in to see his record of assignment . . . . Now, I can provide him access to that . . . . This should be public record and all of a sudden it is no longer a public record. It's an inconclusive 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, Jefferson 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).

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 Doing So

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 references Jackson v. Mortg. Elec. Registration Sys., Inc., 770 N.W. 2d 487 (Minn. 2009). See Def. Br., p. 6.The case is of no import here, however, because use of MERS is authorized by statute in Minnesota.

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 ASSETBACKED PASS THROUGH CERTIFICATES SERIES 2005-EFC3 contains the standard definition of mortgage loan: Mortgage Loans: Such of the mortgage loans transferred and assigned to U.S. Bank pursuant to Section 2.01 as from time to time are held or deemed to be held as a part of the Trust Fund, the Mortgage Loans originally so held being identified in the initial Mortgage Loan Schedule, and Qualified Substitute Mortgage Loans held or deemed held as part of the Trust Fund including, without limitation, each related Mortgage Note, Mortgage and 8

Mortgage File and all rights appertaining thereto. See Mortgage 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, does hereby assign to U.S. Bank without recourse all the right, title and interest 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 otherwise specified below, as of the date so specified): (i) the information set forth in Exhibit G-1 and Exhibit G-2 hereto with respect to each mortgage Loan or The Mortgage Loans, as the case may be, is true and correct in all material Respects at the respective date or dates which such information is furnished; (ii) immediately prior to the conveyance of the Mortgage Loans to U.S. Bank, the Depositor had good title to, and was the sole owner of, each Mortgage Loan free and clear of any pledge, lien, encumbrance or security interest (other than rights to servicing and related compensation) and such conveyance validly transfers ownership of the Mortgage 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. See PSA, 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 9

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 Assignments

The 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 it shall be the intention of the parties executing the same to grant, bargain, sell and convey any lands, tenements, or hereditaments situate in this Commonwealth, upon being acknowledged by the parties executing the same or proved in the manner provided by the laws of this Commonwealth, shall be recorded in the office for the recording of deeds in the county where such lands, tenements, and hereditaments are situate. Every such deed, conveyance, contract, or other instrument of writing which shall not be acknowledged or proved and recorded, as aforesaid, shall be adjudged fraudulent and void as to any subsequent bona fide purchaser or mortgagee or holder of any judgment, duly entered in the prothonotarys office of the county in which the lands, tenements, or hereditaments are situate, without actual or constructive notice unless such deed, conveyance, contract, or instrument of writing shall be recorded, as aforesaid, before the recording of the deed or conveyance or the entry of the judgment under which such subsequent purchaser, mortgagee, or judgment creditor shall claim. Nothing contained in this Act shall be construed to repeal or modify any law providing for the lien of purchase money mortgages. 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

11

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 the Montgomery 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 cites Com. 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 the Montgomery County Court: Even were the Defendants interpretation of the statute permissible, the Legislature clearly expressed its intent to make recording of conveyances compulsory in other ways. Those statutes which permit recording of certain types of documents all appear under the heading INSTRUMENTS SUBJECT TO RECORD. See 21 Pa. Stat. 381, 385, 386, 387, 390, 391, 400, 401, 451. In contrast, 21 Pa. Stat. 351, which makes recording of certain types of documents compulsory, appears under the heading NECESSITY OF RECORDING AND COMPULSORY RECORDING. Accordingly, we conclude that all . . . conveyances . . . shall be recorded, 21 Pa. Stat. 351, means that all conveyances shall be recorded. Even were an alternate reading permissible, the Legislatures organization of the statutes respecting recording of different categories of documents shows that it intended precisely this result. Dismissal on the basis is unwarranted. Montgomery County, 2012 WL 5199361, at * 5. B. Plaintiff Has Standing for its Requested Declaratory and Injunctive Relief

Defendants attacks on Plaintiffs standing for its declaratory and injunctive relief counts fall short. See Def. 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, 13

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. Johnson 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. (citing Franklin 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 statutorilydesignated 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) 14

(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. See 16 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. See Def. 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 the Countys recording system and deprived it of fees and the County has a duty 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. See SAC, Nature of the Action; 53, 68-80, 90. Similar to Franklin Township, the county has a

16

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 to only benefit subsequent bona fide mortgagees 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 is to give public notice in whom the title resides so that no one may be defrauded by deceptious appearances of title.) (quoting Salter v. Reed, 15 Pa. 260, 263 (1850)). Both the harm suffered, and Defendants argument on lack of standing, are similar to those presented in S. 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

17

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 confer standing 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. See Def. 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. See Exhibit 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., JP 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

Incidentally, U.S. Bank, as successor trustee, had a foreclosure sale declared void that was conducted in connection with 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.). See Exhibit 4, hereto. The debtor prevailed on his argument that Defendant failed to comply with the terms of the PSA. Id. at * 5-6. The Michigan Supreme Courts subsequent decision in Residential Funding Co. v. Saurman, 490 Mich. 877 (2011) does not disturb the Hendricks courts ruling as to compliance 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 Defendant

Defendant 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. Jan. 10, 2002) (quoting Rummings 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,

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

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conceding, in the process, that all but one element of the claim has been met. See Def. 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 full benefits of the recording system without paying the full value for these benefits in the form of the fees properly due for each transfer of the beneficial interest of a mortgage. (See Compl. 2629, 4145.) She has further successfully alleged that the Defendants did so in violation of a statutory command to record such assignments. See id.; Section IV.A supra. Because a plaintiff may recover when it would be inequitable for the defendant to retain the benefit without paying full value for it, In re Lampe, 665 F.3d 506, 520 (3d Cir.2011) (citing Schenck 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 it violated 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. See SAC, 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. 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 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. See SAC 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. 22

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. See PSA, 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 prosecute foreclosures 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 23

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. See Pa. 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. See SAC, 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. See SAC, 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

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) (The vital allegation in this case is the assignment of the loan into the WAMU Trust was not completed by May 30, 2006 as required by the Trust Agreement. This allegation gives rise to a plausible inference that the subsequent assignment, substitution, and notice of default and election to sell may also be improper. Defendants wholly fail to address 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 the nominee of the originating lender. See SAC at 72. No written document exists establishing an agency relationship among originating lenders, MERS, and Defendant that would allow Defendant to direct MERS to record a mortgage assignment 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. See SAC at 112; Juarez 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. See Def. 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

Plaintiff has alleged that the mortgage notes were deposited in Defendants RMBS trusts. Defendant could present notes 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 to foreclose 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 Claim

Plaintiffs 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 possession of the mortgage assignments that the County seeks to have recorded, and joined all necessary and indispensable parties. Plaintiffs quiet title claims were appropriately brought under Pennsylvania Rule of Civil Procedure 1061 (Rule 1061). One of the purposes of actions to quiet title under Rule 1061(b)(3) is to compel an adverse party to file, record . . . or admit the validity, invalidity or discharge of, any document, obligation or deed affecting any right, lien, title or interest in land. Pa. R.C.P. 1061(b)(3). Rule 1061 is extremely broad in scope, unifying into one procedure all of the diverse procedures by which clouds on title were formerly tried and to adjudicate title

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disputes when an action in ejectment is not appropriate. Bruker v. Burgess and Town Council of Borough of Carlisle, 376 Pa. 330, 334 (1954); White v. Young, 409 Pa. 562 (1963). Although a plaintiff has neither possession nor an immediate right to possession, the plaintiff may nonetheless sustain an action under either Pa. R.C.P. 1061(b)(2) or (b)(3). Brennan v. Shore Bros., 380 Pa. 283, 286 (1955). An Action to Quiet Title is appropriate by a party not in possession, and not seeking possession, but who wishes to determine all rights in the land. Siskos v. Britz, 567 Pa. 689, 699 (2002). When a case involves a cloud on property, but not a possessory interest, an action may be maintained under Rule 1061. Indymac Bank, FSB v. Bey, No. 3200, 2002 WL 31082395 (Pa. Com. Pl. Sept. 12, 2002). Rule 1061 does not require plaintiff to be in possession of the land in order to maintain the action. Hanson v. Berenfield, 24 Pa. D. &C.2d 361, 373 (1961). Furthermore, an action to compel recordation is permitted by any person in any manner interested in the documentation of the transaction to be recorded. Act of April 1, 1863, P.L. 188, 1, repealed in part by 42 Pa. Cons. Stat. 20002 (a)[414]. Here, the Plaintiff, although lacking a possessory interest in the land in question, qualifies as a person in any manner interested in the recordation of the documentation of the transaction to be recorded. U.S. Banks failure to record mortgage assignments has affected the pecuniary interests of Washington County by depriving the County of the fees due for recording. U.S. Banks failure to record mortgage assignments has also harmed the accuracy, completeness and integrity of Pennsylvanias land title system, which is tracked at the County level. Plaintiff therefore has a direct pecuniary interest affected by the status of the relevant documents as recorded, or, in the instant case, left unrecorded. See Montgomery County, 2012 WL 5199361, at *10 (finding pecuniary interest was affected by the failure to record mortgage assignments). This Court should not dismiss Plaintiffs quiet title claim. The Quiet Title Action is the

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appropriate way for the County to seek to compel the Securitization Trustee to record mortgage assignments for mortgage loans deposited into RMBS trusts for which the Securitization Trustee acts as trustee. 1. This court is an appropriate venue for Plaintiffs quiet title claim Defendant asserts that this Court is not an appropriate venue to consider the claims Plaintiff asserts on behalf of other counties within Pennsylvania. Defendant makes these assertions based on the language in Pennsylvania Rule of Civil Procedure 1062 (Rule 1062), which states that an action to quiet title may be brought in and only in a county in which the land or a part of the land is located. Preliminarily, Defendants venue argument is an improper and premature attack on Plaintiffs class allegations. Pa. R. C. P. 1705 could not be clearer: Issues of fact with respect to the Class Action Allegations may not be raised by preliminary objections but shall be raised by the answer. See also Sherrer v. Lamb, 319 Pa. Super. 290, 294 (1983) ([T]he lower court should not have concerned itself with the preliminary objections to the class action allegations at all.). The issue of the location of mortgaged properties outside of Washington County that are subject to Plaintiffs Complaint is one of fact and, thus, cannot be raised by preliminary objection. Defendant will have ample opportunity to raise this objection at the class certification stage and the court should delay adjudication until that time. Even assuming, arguendo, that Defendants argument can be considered at this stage, this Court can find venue proper under the broader venue rules, Pennsylvania Rule of Civil Procedure 1006 regarding Venue and Change of Venue (Rule 1006) and Pennsylvania Rule of Civil Procedure 2179 (Rule 2179), which are applicable to an action to quiet title by virtue of the rule requiring conformity with civil actions. See 4 Goodrich-Amram 2d 1061(a):2.

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Together these rules define the appropriate venue for cases against corporations. Rule 1006 states that, [a]ctions against the following defendants . . . may be brought in and only in the counties designated by the following rules . . . corporations and similar entities, Rule 2179. Rule 2179 states that a personal action against a corporation or similar entity may be brought in and only inthe county where its registered office or principal place of business is located; a county where it regularly conducts business; the county where the cause of action arose; a county where a transaction or occurrence took place out of which the cause of action arose, or a county where the property or a party of the property which is the subject matter of the action is located provided that equitable relief is sought with respect to the property. Under Rule 1006, failure to make a payment in a county is an occurrence, permitting use of that countys court as an appropriate venue. Nw. Sav. Assn v. Womer, 72 Pa. D. & C.2d 231, 233-234 (Pa. Com. Pl. 1976). See also 2 Standard Pennsylvania Practice 2d 11:6. There is no question that venue is appropriate for the properties that are located in the County of Washington, Pennsylvania. Plaintiff urges this Court to use the broader interpretation of venue under Rules 1006 and 2179 to expand venue to cover all counties in Pennsylvania. Rule 1006 was designed to prevent the hardships and expenses of bringing multiple actions, in multiple counties, that could result in inconsistent verdicts. See Goodrich-Amran 1006 (1975 Suppl.). Finding insufficient venue as to the 66 other counties in Pennsylvania will only lead to judicial inefficiency and unfairness. 2. Plaintiffs quiet title claim sufficiently describes the property Although U.S. Bank has already identified the property in question, Defendant asserts that the County failed to sufficiently describe the land at issue in the quiet title claim as required by Rule 1065. This rule requires that [t]he plaintiff shall describe the land in the complaint. To support its allegation, Defendant cites cases in which the party seeking to quiet title was

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unable to describe the metes and bounds of the land at issue, which prohibited the court from quieting title. MacKubbin v. Rosedale Meml Park, Inc., 413 Pa. 637 (1964) (inability to describe boundaries of cemetery plots); Grace Bldg. Co. v. Parchinski, 78 Pa. Cmwlth. 187, 192 (1983) (documents insufficient to identify boundaries of strip of land purchased in a tax sale); and Cheesman v. Yurkanin, 73 Pa. D. & C.378, 379 (Pa. Ct. Com. Pl. Luzerne County 1950) (inability to describe premises conveyed in an execution sale). This case is distinguishable; a description of the metes and bounds of the land is unnecessary to determine the property involved. Here, as the complaint states, Plaintiff seeks to quiet title on property when assignments of mortgages were made for mortgage loans deposited in RMBS trusts for which Defendant acts as trustee. See SAC at 99. The need to quiet title on these properties arises from Defendants failure to publicly record assignments on the properties, as required under Pennsylvania law. The Complaints description of the property was sufficient enough for Defendant to present evidence to the U.S. District Court for the Western District of Pennsylvania regarding both the number of mortgages and the number of assignments on those mortgages. See Affidavit of Irina Palchuk in Support of U.S. Banks Opposition to Plaintiffs Motion to Remand at 2-7, attached hereto as Exhibit 5; County of Washington, Pa., 2012 WL 3860474 (W.D. Pa. Aug. 17, 2012). In fact, Defendant produced all of the recorded mortgages it believed to be subject to the Complaint, and each recorded mortgage contains a detailed description of the relevant properties. See, e.g., Exhibit C to SAC, at p. 18 (providing detailed description of property). Additional specificity about the properties in question has been obscured by Defendants behavior. The Court should not dismiss Plaintiffs quiet title claim on this ground. Dismissal would reward Defendant for its ongoing violations of the recording laws.

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3. Plaintiff has alleged sufficient facts showing the securitization trustee has possession of the documents sought to be recorded Defendant asserts that Plaintiff must allege facts that show the Securitization Trustee, i.e. U.S. Bank, has possession of the mortgage assignments that the County seeks to have recorded. Defendant states that the County must allege in the Complaint facts showing that U.S. Bank has possession of the alleged assignments or that those assignments exist as documents. To support these claims Defendant points to the language of Section 2 Act of April 1, 1863, P.L. 188, 1, repealed in part by 42 Pa. Cons. Stat. 20002(a)[414] (1863 Act),9 and Pennsylvania court rules requiring notice of the Plaintiffs claims and facts essential to support the claim. Lerner v. Lerner, 954 A.2d 1229, 1235 (Pa. Super. Ct. 2008) (Pennsylvania is a fact-pleading state; a complaint must not only give the defendant notice of what the plaintiffs claim is and the grounds upon which it rests, but the complaint must also formulate the issues by summarizing those facts essential to support the claim). To resolve preliminary objections that Plaintiff has insufficiently stated facts to support their claims, courts consider whether the complaint cites facts sufficiently specific for the defendant to prepare defense. Podolak v. Tobyhanna Twp. Bd. of Supervisors, 37 A.3d 1283 (Pa. Commw. Ct. 2012). Courts must examine and accept as true all material facts set forth in the pleading and all inferences reasonably deducible therefrom. Id. at 1287. The County has alleged facts showing that U.S. Bank has or had possession of the mortgage assignments that the County
9

Section 2 the Act provides: That the courts of common pleas of this commonwealth shall have the power, upon petition and affidavit, setting forth that the petitioner believes that any person, or persons, has in his, or their possession, any such bargains of sales, deeds, conveyances, or other instruments of writing, that the petitioner is the present owner of the premises, or that he is interested in such bargains, deeds, conveyances, or other instruments of writing, and that six months notice has been given to the defendants, or person, or persons, in whose possession the same is, or are alleged to be, to deliver up, or record the same, to grant a rule upon such person to show cause why the same should not be delivered up, or recorded; upon the hearing of said rule, unless the defendant, or defendants, in the same show, to the satisfaction of the court, why the same should not be delivered or recorded, the said court are hereby authorized and required to decreed and direct the said defendant, or defendants, to deliver up, or record, such bargain of sale, deeds or conveyances, or other instruments, in said petition described. . . .

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seeks to have recorded and that would allow the Defendant to prepare their defense. For example, the Complaint states: Defendant represented at the time these trusts were created that they possessed all the rights to certain mortgage loans attached to these properties, free and clear of any encumbrance. See SAC, Nature of Facts, p. 3. U.S. Bank 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). . . . See SAC, Nature of Facts, p. 3-4. [U]se of MERS has obscured the Counties priority rights as creditors and undermined the integrity of their deed records. . . . SAC, Nature of Facts, p. 3-4. There are two documents in particular that need to be properly transferred to the trust a promissory note and the mortgage. The promissory note is the loan contract it is the I.O.U. containing the borrowers promise to repay the money lent. The mortgage is the document conferring the right to enforce the promise to pay through foreclosure. The term mortgage loan generally refers to the mortgage and note together, although colloquially the term mortgage is often used to refer to both the mortgage and the note. As a title theory state for recordation purposes, in which a mortgage is a conveyance of property, Pennsylvania does not sanction the separation of the note from the mortgage. SAC, 21. The trusts are formed pursuant to, and are governed by, contracts called Pooling and Servicing Agreements (PSAs), which are crafted to ensure that the benefits of mortgage securitization flow to the trusts. In order for a trust to be bankruptcy-remote, there must be a true sale of the mortgage loans, which means that all rights to the mortgage loan are transferred to the trust so that no other entity in the chain of title could claim control of the assets in the event of bankruptcy. SAC, 23. The 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. The express language also ensures that the mortgage loan is secured, so that REMIC tax status is achieved. SAC, 24. [t]he PSA for MORTGAGE ASSET-BACKED PASS THROUGH CERTIFICATES SERIES 2005-ECF3 contains the standard definition of mortgage loan: Such of the mortgage loans transferred and assigned to the Trustee pursuant to Section 2.01 as from time to time are held or deemed to be held as part of the Trust Fund, the Mortgage Loans originally so held being identified in the initial Mortgage Loan Schedule, and Qualified substitute Mortgage Loans held or deemed held as part of the Trust Fund including, without limitation, each related mortgage Note, Mortgage and Mortgage File and all rights appertaining thereto. . . . SAC, 26. 33

The PSA for MORTGAGE ASSET-BACKED PASS THROUGH CERTIFICATES SERIES 2005-ECF3 contains a section in which the Trustee acknowledges acceptance of assignment to it of the Mortgage Loans. . . . SAC, 27. Defendant is a MERS member and uses a single Trustee ID Number to have transactions recorded in MERS internal records that are related to all of the RMBS trusts that U.S. Bank administers. SAC, 52. 4. Plaintiff does not need to join landowners as necessary and indispensable parties Defendant alleges, pursuant to Pennsylvania Rule of Civil Procedure 1028(a)(5) (Rule

1028) that the County has failed to join necessary and indispensable parties to its quiet title action. Namely, Defendant seeks to add the owners of the parcels of land with mortgages loans that were assigned and became mortgage loans deposited in RMBS trusts for which Defendant acts as trustee. Defendant argues that the landowners interests in their properties will be directly affected by the resolution of the Countys claims. To support their allegations, Defendants cite Pennsylvania necessary party cases that are facially distinguishable. In the cited cases, courts identified an interest of the missing party that was at issue in the litigation and could be compromised by an adjudication without the party. These cases involved easements, adverse possession, disputed conveyances, or other competing claims of exclusive rights to the same property interest.10 These allegations demonstrate that Defendant misses the point of this quiet title action. The primary effect of the quiet title claim will be to cause corrective mortgage assignments to be recorded so that a proper chain of title will be restored for the subject properties. It defies reality to believe that a landowners interest will be directly and adversely
Barren v. Dubas, 295 Pa. Super. 443 (1982) (absent party claims interest in land on which Plaintiff seeks to impose an easement); Pocono Pines Corp. v. Pa. Game Commn, 464 Pa. 17 (1975) (absent party reserved mineral rights and reversionary interest in land over which Plaintiff sought exclusive title); Columbia Gas Transmission Corp. v. Diamond Fuel Co., 464 Pa. 377 (1975) (absent party was fee simple owner of land over which disputed easement traversed); Zerr v. Commw., 131 Pa. Cmwlth. 317 (1990) (absent party held mineral rights in strips of land which could be lost forever if Plaintiffs prevailed in quiet title claim); Hartzfeld v. Green Glen Corp., 380 Pa. Super. 513 (1989) (absent lot owners had rights under deed covenants to use strip of beach that was the subject of plaintiffs competing adverse possession claim).
10

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affected by a court order authorizing such injunctive relief. Accordingly, such landowners are not indispensable parties. A party is indispensable when his rights are so connected with the litigated claims that no relief can be granted without infringing upon those rights. Reichley v. N. Penn School Dist., 113 Pa. Cmwlth. 528 (1988); Columbia Gas Transmission Corp. v. Diamond Fuel Co., 464 Pa. 377, 379(1975) (an indispensable party is one whose rights are so directly connected with and affected by litigation that he must be a party of record to protect such rights.). An indispensable party must be made a party to the lawsuit in order to protect those rights. Nudi v. Pine Twp., 92 Pa. Cmwlth. 32 (1985). Among the factors courts consider to determine whether a party is indispensable are: 1. Whether the absent party has a right or interest related to the underlying claim; 2. If so, the nature of that right or interest; 3. Whether that right or interest is essential to the merits of the issue; and 4. Whether justice can be afforded without violating the due process rights of the absent parties. Mechanicsburg Area School Dist. v. Kline, 494 Pa. 476 (1981); Borough of Wilkinsburg v. Horner, 88 Pa. Cmwlth. 594 (1985). In this case, while the landowners have an interest in the property in question, their property rights are separate from the interests of the County and its Recorder of Deeds, not essential to the merits of the issue of recording assignments, and justice can be afforded without violating their due process rights. The subsequent conveyances of mortgage notes, for purposes of securitization, that occurred after the current landowner were deeded the property do not have a substantive effect on the nature and extent of the landowners property rights or obligations under the mortgage. Success on the merits of this case can only benefit the landowners, as they will possess quiet title to their property, at no direct expense, and will more easily be able to transfer their property interests. Additionally, current landowners do

35

not have a direct pecuniary interest in the recording fees that Plaintiffs seek. There is no need to name the current landowners as parties to Plaintiffs quiet title claim. Defendant argues that the declaration that it holds unperfected mortgages could adversely affect landowners because such an impairment of the lenders security interest in the land may lead the lender to accelerate the mortgage debt or take other actions to collect the debt. See Def. Br. at 18. This assertion is pure factual speculation and should not be credited, particularly at the preliminary objection stage. A more likely outcome from Plaintiffs declaration and injunction for corrective assignments is to clear title to landowners property, increasing value and improving prospects for resale. Defendant makes a similar objection to Plaintiffs declaration that Defendant lacked standing to prosecute foreclosures in MERS name or following a recorded mortgage assignment from MERS, arguing that the present owners would be adversely impacted by such a determination. See Def. Br., pp. 17-18. This argument, too, falls short because (a) the landowners who purchased property at foreclosure sales from Defendant already lack clear title and the declaration does not change that reality, (b) the accompanying injunctive relief from Count IV, seeking recordation of the missing assignments, can only ameliorate these landowners current adverse condition by assisting in clearing title, and (c) the landowners arguably do not have an ownership interest at stake because title never successfully passed to them. See Bevilacqua, 460 Mass. at 763 (finding that purchaser of property following foreclosure sale by U.S. Bank on MERS mortgage lacked standing to bring quiet title action because U.S. Bank lacked authority to convey title to purchaser). This Court should therefore not dismiss the Plaintiffs quiet title claims for failure to identify indispensable parties.

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F. Plaintiffs Requested Declaratory Judgment that U.S. Bank Holds Unperfected MERS Mortgages and Requested Injunctive Relief to Compel Recordation of Corrective Mortgage Assignments is Sound Defendant has represented that MERS Mortgages accompanying notes deposited in its trusts are perfected, and reaped the benefits of these representations, but has not recorded the requisite mortgage assignments for the representations to be truthful. Accordingly, Plaintiff seeks a declaration that MERS Mortgages accompanying notes deposited in its Trusts are not perfected and requests injunctive relief to compel recordation of corrective mortgage assignments. The relief sought is valid and Defendants preliminary objections to Plaintiffs Count III should be overruled. 1. Transfer of the note requires recordation of a mortgage assignment for the accompanying mortgage to be perfected The issue at the center of this count is not whether the mortgage follows the note,11 as U.S. Bank implies, but rather, whether the mortgage remains perfected on transfer of the note without recording a mortgage assignment. No authority states that the mortgage remains perfected. 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). Unrecorded conveyances shall be adjudged fraudulent and void as to any subsequent bona fide purchaser or mortgagee or holder of any judgment, duly entered in the prothonotary's office . . . . Id. A mortgage assignment is a conveyance that must be recorded. See Pines, 577 Pa. at 576. Here, when notes were transferred to
Defendants attempt to gain the benefit of this longstanding doctrine is curious, considering that its use of MERS is premised on the idea that the mortgage and note are separated. Rinegard-Guirma v. Bank of Am., N.A., No. 10-1065, 2010 WL 3945476, at * 4-5 (D. Or. Oct. 6, 2010). MERS itself has represented that it immobilizes the mortgage lien while transfers of the promissory notes and servicing rights continue to occur. Mortg. Elec. Registration Sys., Inc. v. Neb. Dept. of Banking & Fin., 270 Neb. 529, 533 (2005). In other words, Defendant is now arguing that not only can an actor at once be principal and agent, but that an object can at once be immobilized and mobile. Cf Landmark Nat'l Bank v. Kesler, 289 Kan. 528, 538 (2009) (stating that MERS defines its role in much the same way that the blind men of Indian legend described an elephant-their description depended on which part they were touching at any given time).
11

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the trust, but mortgage assignments to the trust were not recorded, the mortgages were unperfected. Even if the mortgages followed the notes into the trust, then, the trust merely held unperfected mortgages. Defendant looks to the Uniform Commercial Code (UCC) for support to the contrary. A close examination of the UCC, however, plainly shows that this support is illusory. 13 P.S. 9308(e), part of Pennsylvanias adoption of the UCC, merely states that perfection (again, the creation of priority rights) against third parties in the note means perfection of the security interest in the sale of the mortgage. In other words, the buyer of the promissory note has priority in the mortgage instrument vis--vis other claimants, such as a creditor of the seller who attempts to levy on the note and mortgage. This, however, does not mean that the buyer of a promissory note has priority in the underlying collateral (here, the home) vis--vis other mortgagees. Defendants pitfall in reaching a contrary conclusion lies in its definition of security interest in the colloquial sense as a mortgage, rather than as the sale of a promissory note, as the statute provides. Specifically, since 2001, 13 P.S. 1201(35) (in Article 1 of the UCC) has defined security interest to include any interest of . . . a buyer of . . . a promissory note in a transaction that is subject to Division 9. Along the same lines, 13 Pa. Stat. 9102 defines a secured party to include the buyer of a promissory note and defines debtor to include the seller of a promissory note. 13 Pa. Cons. Stat. Ann. 9203(a) provides that a security interest (read: the interest of a buyer of a promissory note) attaches to collateral when it becomes enforceable against the debtor by the secured party (read: the buyer of the promissory note). In other words, the buyer of the note owns the property and could replevy it if it were detained or sue conversion or trover if it were damaged. 13 Pa. Cons. Stat. Ann. 9203(b) presents the four requirements for the security interest to be enforceable: (1) the debtor (the seller of a promissory note) has rights in

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the collateral (i.e., owns the note), (2) the debtor has authenticated a security agreement (i.e., has signed a sale document), (3) the security agreement (sale document) describes the collateral concerned, and (4) the buyer has given value. 13 Pa. Stat. 9203(g), which Defendant highlights, is triggered at this point and states that attachment (read: enforceability) of a security interest (read: the sale) in a right to payment (read: a note) secured by a security interest in real property, with an accompanying mortgage, is also the attachment (read: sale) of the mortgage. Hence, at least under the UCC, the mortgage follows the note. Yet, again, though, 13 Pa. Stat. 9308(e) provides that perfection in the note means perfection in the mortgage instrument (read: protection against a creditor of the seller of the note who attempts to levy on the note and mortgage), and not perfection in the mortgage (read: priority over other competing mortgages and liens). To believe otherwise, and accept Defendants position that perfection in the mortgage occurs automatically on transfer of the accompanying note, would be to render the statutory requirement that all conveyances be recorded meaningless. See 212 Pa. Stat. 351 (2011); cf Mortg. Elec. Registration Sys., Inc. v. Sw. Homes of Ark., 2009 Ark. 152, 301 S.W.3d 1, 5 (2009). This result cannot obtain under Pennsylvanias codified principles of statutory construction. See Orson, Inc. v. Miramax Film Corp., 79 F.3d 1358, 1374 (3d Cir. 1996) (referencing 1 Pa. Cons. Stat. Ann. 1921(a)). 2. Pennsylvania law requires that a mortgage be properly recorded, by identifying the actual record owner, to impart constructive notice In Pennsylvania, a mortgage must be properly recorded to impart constructive knowledge. See Prouty, 225 Pa. 570 (1909); First Citizens Natl Bank, v. Sherwood, 583 Pa. 466 (2005) (finding that a mortgage properly recorded provides constructive notice). In other words, for a

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recording to impart constructive notice sufficient to perfect a partys interest in the mortgage (creating priority rights against third parties), the recording must be properly done. In Prouty, for example, the Pennsylvania Supreme Court found that the mortgage was never correctly recorded because [t]he record of a mortgage given by S.J. Marshall is not notice to anyone seeking for encumbrances against L.J. Marshall. Prouty, 225 Pa. at 574. From [Prouty] we follow the proposition that a document must be properly recorded, by identifying the actual record owner, to be constructive notice. Ind. Mortg. Co. v. MSTC Inv., Inc., No. 07-6734-18-5, 2008 WL 7414679, at * 1 (Pa. Com. Pl. Dec. 17, 2008) (finding that misspelling in mortgage of DAngelo Construction Company, Inc as DAngleo Construction Company, Inc. did not provide constructive notice) (Exhibit 6, hereto), affirmed by 987 A.2d 832 (Pa. Super. Ct. 2009), appeal denied, 606 Pa. 665 (2010). 3. MERS Mortgages are improperly recorded for Defendants purposes and fail to provide constructive notice for subsequent noteholders Because under Pennsylvania law instruments must be properly recorded and record is notice of just what it contains, no more and no less, Prouty, 225 Pa. at 577, an examination of MERS mortgages is required to ascertain what notice they provide and whether their recordation is proper. Defendant and MERS desire for the mortgage to be read as follows. The document designates MERS as nominee of an originating lender and its successors and assigns. This is done so that when the accompanying note changes hands, MERS can act as the common agent to the originating lender and subsequent noteholders who are MERS members, and take directions from whoever the noteholder is at any given time. If MERS were merely designated as nominee in the document, though, then the recording index would only show the originating lenders name, and the world would only be on notice that the originating lender held a claim on the property. The 40

mortgage would be unperfected as to subsequent noteholders unless mortgage assignments were recorded. To address this issue, MERS is also designated as mortgagee so that the county recorder will denominate MERS as a grantee in its recording index, purportedly putting the world on notice that all 5,000 MERS members could have a claim on the property. Thus, by MERSs logic, when any of the 5,000 members becomes a noteholder, they retain a perfected mortgage, even though MERS cannot itself be sure which, if any, of its 5,000 members are actually the noteholder or if they have sold the note to a non-member of MERS, but failed to report the sale to MERS. See Bain v. Metro. Mortg. Group, Inc., 285 P.3d 34, 41 (Wash. 2012) (Under the MERS System, questions of authority and accountability arise, and determining who has authority to negotiate loan modifications and who is accountable for misrepresentation and fraud becomes extraordinarily difficult.). MERS Mortgages are not properly recorded for Defendant to represent that it holds perfected mortgages in the securitization process because no recording puts the world on notice that U.S. Bank has an interest in the mortgage.12 It is absurd to believe, as Defendant argues, that the mere placement of MERS as grantee in the recording index purportedly supplies constructive notice for all 5,000 MERS members. See Def. Br., p. 29 (stating that the public should be on notice because every mortgage where MERS is named as mortgagee discloses that it is acting as mortgagee solely in a nominee capacity for the original lender and its successors and assigns.). This is all the more true considering that the Pennsylvania Supreme court and lower courts have held that an instrument is not perfected when a single letter of the lienholders name is
A colorable argument can be made that MERS mortgages are improperly recorded and that they should be treated as if they were not recorded at all. The MERS System is irreconcilable with Pennsylvanias status as a title theory state. In Pennsylvania, a mortgage is considered a conveyance of land for recordation purposes. Pines, 577 Pa. at 576. In other words, the mortgagee takes legal title to the secured property while the mortgagor retains a beneficial interest in the form of an equity of redemption. To say then, that, MERS holds legal title to the mortgage as Lender As agent while Lender A retains the beneficial interest suggests the division of an already divided interest. It is unprecedented under Pennsylvania law for division of legal title to secured property into legal title to the legal title and a beneficial interest in the legal title.
12

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transposed or wrongly transcribed. Here, Defendants strained reading of the mortgage that would grant it perfection in MERS mortgages as one of 5,000 of MERS successors and assigns is leaps and bounds from seeking the benefit of the doubt for a minor scriveners error, which the law does not even countenance. Indeed, in MERS mortgages such as Exhibit C to the Complaint, the list of potential principals to MERS is not provided and U.S. Bank certainly is nowhere to be found on the instrument. The Supreme Court of Arkansas clearly set forth why, in a state with a wellestablished recording system such as Pennsylvania, recordation of mortgage assignments from one MERS principal to another are necessary for the mortgage to remain perfected. Finally, we note that Arkansas is a recording state. Notice of transactions in real property is provided by recording. See Ark. Code Ann. 14-15-404 (Supp. 2007). Southwest is entitled to rely upon what is filed of record. In the present case, MERS was at best the agent of the lender. The only recorded document provides notice that Pulaski Mortgage is the lender and, therefore, MERSs principal. MERS asserts Pulaski Mortgage is not its principal. Yet no other lender recorded its interest as an assignee of Pulaski Mortgage. Permitting an agent such as MERS purports to be to step in and act without a recorded lender directing its action would wreak havoc on notice in this state. Sw. Homes of Ark., 2009 Ark. 152, 301 S.W.3d at 5, reh'g denied (Apr. 23, 2009). This position should prevail here, particularly in light of Pennsylvanias requirement that notice be proper and that a recorded instrument is notice of just what it contains, no more and no less. 4. Principles of agency law prove the validity of Plaintiffs, not Defendants, position Defendant argues that the use of a nominee or agent in real estate transactions has long been sanctioned. Perhaps. But, Pennsylvania law does not allow a single agent to simultaneously follow directions from 5,000 principals, as the MERS system contemplates. In fact, in this context, agency law dictates that MERS mortgages are not perfected for subsequent noteholders in the securitization process, such as U.S. Bank, because the assignments have not been recorded with the 42

County Recorder of Deeds. A mortgage assignment from the originating lender, with MERS as nominee, to the subsequent noteholder (with MERS as its nominee, if the subsequent noteholder so prefers) would be required for the mortgage to be perfected. It is axiomatic that an agent is tethered to a specific principal and, further, that an agent may only do what the principal may do and, conversely, may not do what the principal might not do were the principal to act on its own behalf. See 2A C.J.S. Agency 129 (2003); Sylvester v. Beck, 406 Pa. 607, 610-611 (1962) (There can be no doubt that an agent owes a duty of loyalty to his principal and in all matters, affecting the subject of his agency, he must act with the utmost good faith in the furtherance and advancement of the interests of his principal.). As a result, when a note changes hands from the originating lender to a subsequent lender, MERS is not truly the same entity from beginning to end. Rather, it fundamentally changes because it must align itself with the interests of the new principal the new noteholder once the note changes hands. MERS must change hats from being the first principals agent to being the second principals agent. Yet, throughout this transaction, the mortgage lists MERS as nominee for the originating lender, albeit for the originating lender and its successors and assigns, and no notice is supplied to the public that MERS is fundamentally changing its agency role as the promissory note is exchanged behind the scenes. Thus, the designation of MERS as mortgagee, in order to be indexed by the recorder as grantee, is false and misleading to the extent that it has been exploited by MERS, and its members such as Defendant, to provide notice of liens for MERS members other than the originating lender (with MERS as its agent). No powers, including the imputation of constructive notice to potential and competing lienholders, are somehow independently conferred on Defendant merely by the designation of MERS as mortgagee in mortgages attached to notes that Defendant

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now holds. See Mortg. Elec. Registration Sys., Inc. v. Saunders, 2010 ME 79, 2 A.3d 289, 295 (2010) (MERS's only right is the right to record the mortgage. Its designation as the mortgagee of record in the document does not change or expand that right; and having only that right, MERS does not qualify as a mortgagee.). After all, MERS is not mortgagee in the legal sense since it has no interest in the accompanying note and thus, as discussed, supra, cannot act independently from the principal that it is tethered to at any given time. See id.; SAC at 53. Because only the originating lender is named on the mortgage and the identity of potential subsequent MERS member transferees is concealed, the MERS mortgage is only notice as to the originating lender. Consequently, mortgage assignments must accompany note transfers in order for note transferees to hold a perfected mortgage. 5. Even assuming, arguendo, that the MERS model is valid, trust depositors are not MERS members Assuming, arguendo, that the MERS system is held to be consistent with applicable law, and mortgage assignments need not be recorded when the accompanying notes are transferred among MERS members in order to maintain perfection of the mortgage, Defendant faces yet another hurdle. Trust depositors, such as Residential Asset Management Products, Inc. (RAMP), an entity which served as a depositor for U.S. Banks trusts, are not MERS members. See PSA, showing RAMP as depositor); Member List Found, https://www.mersonline.org/mers/mbrsearch/validatembrsearch.jsp (omitting RAMP, as well as other depositors, from comprehensive list of MERS members) (last accessed March 1, 2013); SAC, at 44, 49. Under MERS own Membership Agreement, when a note is transferred to a non-MERS member, a mortgage assignment out of the MERS system is to be recorded. See SAC

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at 44 (quoting MERS former Corporate Secretary). Even MERS loose understanding of agency law has its limits.13 Yet, here, when notes were transferred from originating lenders to depositors to Defendant, mortgage assignments were not recorded, even though the depositors were not MERS members. See id. at 49. For example, the note accompanying the MERS mortgage attached to the Complaint traveled, at a minimum, from originating lender EquiFirst to the Depositor, RAMP, and then to Defendant. See id. at 61, 65. There are no recorded mortgage assignments for this mortgage, even though RAMP is not a MERS member, and, thus, a mortgage assignment from the originating lender to RAMP and then from RAMP to Defendant would have been required for the interest in the mortgage to remain perfected. Id. at 64-65. G. Defendant Lacked Authority to Foreclose in MERS Name and Following an Assignment from MERS, Necessitating Declaratory Relief to Assist in Clearing Title and Correcting Plaintiffs Land Records 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 This argument is set forth in full above and should be considered fully incorporated by reference. See supra III.D.3. 2. Defendants failure to recite all assignments in foreclosure complaints violated Pa. R. C. P. 1147(a)(1), rendering foreclosures it conducted wrongful The Pennsylvania Rules of Civil Procedure require a foreclosure plaintiff to set forth in its complaint the parties to and the date of the mortgage, and of any assignments, and a statement of the place of record of the mortgage and assignments. Pa. R. C. P. 1147 (a)(1) (emphasis added). It is beyond dispute that the words any assignments in this context require

13

While the depositor is often a subsidiary of the securitization sponsor, the legal separateness of the depositor from the deals sponsor and/or any loan originators is critical to the securitization being bankruptcy remote.

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enumeration of all assignments in the chain of title leading to the foreclosing plaintiff. See Wells Fargo, 8 A.3d at 921-922 (setting aside sheriffs sale when Wells Fargo's complaint detail[ed] the assignment from First Franklin, A Division of National City Bank (the Bank) to First Franklin Financial Corporation (the Corporation), but ma[de] no mention of any other assignment.); cf. Pines Plaza Bowling, Inc. v. Rossview, Inc., 394 Pa. 124, 145 A.2d 672, 677 (1958) (finding that the words in any event meant in all events in contract). In securitization, mortgage loans are conveyed typically three times, and, by law at least two times, before they reach Defendant. See SAC, at 22-31. These conveyances must be recorded as mortgage assignments. See id. at 16-17. Defendant, however, did not record, or cause to be recorded, these mortgage assignments and, therefore, could not aver in its foreclosure complaints the complete chain of assignments, as required to prosecute the foreclosures. See id., at 31. As stated above, Defendant has prosecuted foreclosures under two methods, and both failed to satisfy Pa. R. C. P. 1147 (a)(1). First, the foreclosure complaints Defendant filed for prosecutions in MERS name averred that there were no assignments because that is Defendants and MERS longstanding litigation positions even though there were likely three, and at least two, conveyances before reaching Defendant that should have been recorded. Second, when Defendant foreclosed following recordation of a mortgage assignment from MERS to Defendant, these violated the rule because the mortgage loans traveled a path of A-BC-D(efendant) rather than from MERS to Defendant, and, hence, all assignments were not set forth. The Superior Courts decision in U.S. Bank v. Mallory, 982 A.2d 986 (Pa. Super. Ct. 2009), relied on heavily by Defendant, but which predates Lupori above, is consistent with

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Plaintiffs analysis. There, the court held that averring in a foreclosure Complaint that an assignment is in the process of recording was satisfactory for the putative assignee to satisfy Pa. R. C. P. 1147 (a)(1) and initiate foreclosure proceedings. Plaintiff here argues, however, that while the foreclosure complaints may have averred one assignment from MERS to U.S. Bank, they did not set forth the entire chain of title, as required by Pa. R. C. P. 1147 (a)(1). Because the court in Mallory did not have the benefit of examining the foreclosure complaint side-by-side with securitization documents it could not know that the foreclosing plaintiff had failed to put forward all assignments. This court, who does have the benefit of seeing the complete nature of Defendants scheme, should therefore not feel restrained from entering granting Plaintiffs requested declaratory relief. 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 Defendant argues that even if it, or MERS, lacked standing to conduct foreclosure sales, such sales are final and cannot be challenged. A fair reading of Plaintiffs complaint demonstrates that Plaintiffs request for declaratory and injunctive relief challenging MERSs standing is not aimed at setting aside completed foreclosures. Plaintiff is not seeking to open final judgments of foreclosure. The Complaint merely points out that if Defendant or MERS lacked authority to conduct the sales, then the purchasers of the foreclosed properties may lack clear title. See Com. v. Bank of Am., N.A., No. 11-4363-BLS1, 2012 WL 6062747 (Mass. Super. Dec. 3, 2012) (holding that Massachusetts Attorney General stated claim against MERS and other defendants because their foreclosure practices led to potential lack of clear title); Bevilacqua, 460 Mass. at 763 (finding that purchaser of property following foreclosure sale by U.S. Bank on MERS mortgage lacked

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standing to bring quiet title action because U.S. Bank lacked authority to convey title to purchaser in the first instance). Lack of clear title follows as a consequence of the common law principle nemo dat quod non habet. This principle, which means he who hath not cannot give, is the bedrock principle on which all commercial law is built. See, e.g., J. F. Dolan, et al., Core Concepts of Commercial Law: Past, Present, and Future: Cases and Materials 2 (Thompson West, 2004) (The First Rule of Conveyancing Nemo Dat); see also U. S. v. Lavin, 942 F.2d 177, 185-186 (3d Cir. 1991) (describing the principle as hornbook commercial law). It is well-established, black letter law that the principle trumps the competing bona fide purchaser principle that protects parties who take for value in good faith. See W.Warren, Cutting Off Claims of Ownership Under the Uniform Commercial Code, 30 U. Chi. L. Rev. 469, 470 (1963) (stating that it is wellestablished that a good faith purchaser from a thief or a mere bailee took subject to claims of ownership.); Estey Co. v. Dick, 41 Pa. Super. 610, 613 (1910) (It is clear, therefore, that the bailee could not by a sale . . . have shaken or disturbed the title of the owner. It is equally certain . . . a purchaser at sheriffs sale would take no title as against the owner because the bailee could not accomplish indirectly what she was unable to do directly.). Here, then, as in Bevilacqua, those who took title to properties at foreclosure sales improperly obtained by Defendant, may have clouded title, thereby impacting both value and salability. See SAC, 79-80. This in turn has spillover impacts on neighboring properties values. Id. If properties sell for reduced prices because of clouded title, it will depress neighboring home values and ultimately county real estate tax assessments. Id. As a result of Defendants conduct, the Counties have devoted, and will continue to devote, substantial services, time, and expense in determining the ownership rights of parties laying claim to these properties. Id. To avoid these costs, begin to clear title, and correct the chain of title in Plaintiffs land records, the

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court should declare that MERS, and U.S. Bank-administered trusts receiving assignments from MERS, were not the parties in interest to prosecute foreclosures for notes in RMBS trusts administered by U.S. Bank as Trustee. V. CONCLUSION For the foregoing reasons, Defendants Motion to Dismiss should be denied.

Respectfully submitted, March 4, 2013

ROBERT PEIRCE & ASSOCIATES, P.C. By: /s/ D. Aaron Rihn, Esquire D. AARON RIHN, ESQUIRE Pa. I.D. No.: 85752 Robert Peirce & Associates, P.C. 2500 Gulf Tower, 707 Grant Street Pittsburgh, PA 15219 (412) 281-7229 WHITFIELD BRYSON & MASON LLP GARY E. MASON JASON S. RATHOD 1625 Massachusetts Ave., NW Suite 605 Washington, DC 20036 Phone: (202) 429-290 CUNEO GILBERT & LADUCA JONATHON W. CUNEO, ESQ. CHARLES LADUCA, ESQ. 507 C Street, N.E Washington, D.C. 20002 REICH AND BINSTOCK, LLP DEBRA BREWER HAYES 4265 San Felipe, Ste. 1000 Houston, TX 77027 Phone: (713) 622-7271

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CERTIFICATE OF SERVICE The undersigned hereby certifies that the foregoing Plaintiffs Brief in Opposition to the Preliminary Objections of U.S. Bank National Association to Plaintiffs Second Amended Complaint was served by electronic mail to Defendants counsel of record and sent via first class mail to the Court of Common Pleas of Washington County, Pennsylvania on this 4th day of March, 2013.

By: /s/ D. Aaron Rihn, Esquire D. AARON RIHN, ESQUIRE

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