March 26, 2013
US District Court for Arizona Rejects Split-Note Theory Claim Made in Multi-District Litigation
In In Re MERS Litigation, 09-2119-JAT (D. Ariz. 2011), the case was a multi-district litigation concerning claims related to the formation and operation of MERS, Inc. and MERSCORP, Inc. The plaintiffs alleged violations of Arizona Revised Statutes (“A.R.S.”) § 33-420; the tort of wrongful foreclosure; violations of Nevada Revised Statutes § 107.080 and Oregon Revised Statutes § 86.735; allegations of aiding and abetting wrongful foreclosure; aiding and abetting predatory lending; unjust enrichment; and slander of title; violations of O.R.S. § 646.607, and South Carolina Code of Laws § 39-5-10. All of the claims turn on the contention that naming MERS as a beneficiary on the deeds of trust, and the subsequent operation of the MERS system splits the MERS deeds of trust from their promissory notes and renders these notes unsecured and unenforceable.
The court rejected the contention. They reasoned that none of the cases cited by Plaintiffs support their theory that naming MERS as the beneficiary completely destroys the security and bars all attempts at non-judicial foreclosure in Arizona, California, Nevada, or Oregon. Additionally, the court did not find legal support for the proposition that the MERS system of securitization is so inherently defective so as to render every MERS deed of trust completely unenforceable and unassignable. The court also did not find any of the contentions supported by statutory authority.
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