In Witt v. CIT Group/Consumer Finance Inc., No. 2:10 CV 440 TS, 2010 WL 4609368 (D. Utah Nov. 5, 2010), the United States District Court of Utah granted Defendants’ motion to dismiss Plaintiffs’ claims.

On September 30, 2002, Plaintiffs executed a promissory note and a deed of trust in conjunction with a transaction to borrow money to finance a house. The deed of trust assigned all of the lender’s beneficial rights, title, and interest to MERS. On October 30, 2007, the lender securitized the mortgage loan and sold it to another party. Plaintiffs defaulted under the terms of the note and deed of trust, and on April 7, 2008, MERS appointed a successor trustee. Thereafter, the trustee initiated foreclosure proceedings on Plaintiffs’ property.

Plaintiffs first allege that the assignment from the lender to MERS was invalid because Plaintiffs never consented to the assignment. However, the court found that Plaintiffs’ consent was not required because “under general contract law, the assignability of a contract is assumed unless the parties express a contrary intent by contract.” In the case at hand, the plaintiffs “have not pled nor brought forth any evidence to suggest that Plaintiffs contracted for a prohibition on the assignment of the Note and Deed of Trust.” The court went on to say that the deed of trust, in fact, expressly provides for assignment.

Next, the plaintiffs claimed that the deed of trust and note were no longer valid because Defendants “split” the note in the process of securitization. The court, however, looked to “well-settled precedent” that establishes that “transfer of the note carries with it the security, without any formal assignment or delivery, or even mention of the latter.”

Finally, the plaintiffs brought forth a claim based on the violations of the Truth in Lending Act (TILA). The court quickly dismissed this claim as time barred. Under TILA, an action must be brought “within one year from the date of the occurrence of the violation.” A TILA violation occurs when the credit transaction is “consummated and completed.” The credit transaction at issue between the parties was consummated on September 30, 2002, and the opportunity for the plaintiffs to bring a TILA claim expired on October 1, 2003. Thus, the court dismissed each of the plaintiffs’ claims.

In Burnett v. Mortgage Electronic Registration Systems, Inc., No. 1:09 CV 00069 DAK, 2009 WL 3582294 (D. Utah Oct. 27, 2009), the United States District Court of Utah held that Mortgage Electronic Registration Systems, Inc (“MERS”) had authority to initiate non-judicial foreclosure on property of the plaintiff and to appoint a successor trustee. In this case Plaintiff received a loan in order to purchase a home. In conjunction with the loan, Plaintiff signed a trust deed, which identified MERS as “beneficiary.” The trust deed also gave MERS the right to “exercise any or all of [Lender’s] interests, including, but not limited to, the right to foreclose and sell the property; and to take any action required of Lender.” Plaintiff defaulted under the trust deed, and thereafter, MERS appointed Woodall as Successor Trustee. MERS initiated foreclosure on Plaintiff’s property and Woodall carried out the foreclosure.

The plaintiff brought forth six separate claims against Defendants including: (1) violations of the Fair Debt Collection Practices Act, (2) violations of the Utah Consumer Sales Practices Act, (3) breach of duty, (4) a request for declaratory judgment, (5) violations under § 57-1-31 of the Utah Code and (6) slander of title. The court stated that the “driving argument underlying all of Plaintiff’s claims is that MERS lacked authority to initiate the foreclosure of the Property or to appoint Woodall Successor Trustee. Plaintiff argues that because MERS was without authority to appoint Woodall Successor Trustee that Woodall also lacked authority.”

However, the court found that “the Deed of Trust expressly gives MERS both the authority to foreclose and the authority to appoint a successor trustee.” The court went on to say that upon Plaintiff’s default in payments, “MERS had authority to ‘take any action’ required of Lender, including the right to appoint Woodall trustee and the right to foreclose and sell the property.” Thus, the court dismissed Plaintiff’s complaint.

In Fowler v. ReconTrust Company, N.A., No. 2:10 CV 01143, 2011 WL 839863 (D. Utah March 10, 2011), the United States District Court of Utah held that Plaintiffs had no viable claim for quiet title because the trust deed executed by the plaintiffs was a valid encumbrance against their title. In the trust deed, MERS was named as “Beneficiary as nominee for Lender and its successors and assigns.” MERS later assigned beneficial interest of the trust deed to BAC Home Loans Servicing, LP (BAC). ReconTrust was subsequently appointed successor Trustee by BAC. The plaintiffs’ claimed that the trust deed was not valid, and this claim rested on the allegation that MERS lacked authority to assign beneficial interest under the trust deed.

The court, however, pointed out that past decisions “affirmed MERS’[s] power to act as the beneficiary of the Trust Deed as Lender’s nominee under Trust Deeds identical to this one.” Those cases found that MERS is able to take any actions required of the lender, including the ability to pursue foreclosure proceedings and assign beneficial interest. Thus, MERS’s assignment of beneficial interest to BAC, and BAC’s subsequent appointment of ReconTrust as the successor trustee, was valid. So, the trust deed is a legitimate encumbrance on Plaintiffs’ title.

In Commonwealth Property Advocates v. Citimortgage, Inc., No. 2:10 CV 00885 CW, 2011 WL 98491 (D. Utah Jan. 12, 2011), the United States District Court of Utah held that MERS had a right to foreclose the property at issue regardless of the fact that the note was sold for purposes of securitization. In this case, the plaintiff’s claim that Defendants cannot foreclose on the property is premised on the notion that Utah Code Ann. § 57-1-35 provides that when lenders transfer a note for securitization, “it loses the rights granted in the trust deed and the authority to foreclose.” MERS was named in the trust deed as beneficiary and “nominee for Lender and Lender’s successors and assigns, and the successors and assigns of MERS.”

The court rejected plaintiff’s interpretation of § 57-1-35 and dismissed plaintiff’s claim. It found that “Plaintiff offers no evidence or legal argument that MERS cannot contract for the right and power of foreclosure regardless of who holds the note, or the beneficial interest under the trust deed. Nor does Plaintiff demonstrate that such rights are actually ‘lost by transfer of the debt.’ Utah Code Ann § 57-1-35 does not address whether the parties can agree by contract to have someone other than the beneficial owner of the debt act on behalf of that owner to enforce rights granted in a trust deed.”

In Commonwealth Property Advocates, LLC v. Mortgage Electronic Registration Systems, Inc, 474 F. App’x 732 (10^th Cir. 2012), the United States Court of Appeals for the Tenth Circuit held that Mortgage Electronic Registration Systems, Inc (“MERS”) had authority to initiate non-judicial foreclosure on property of the plaintiffs. In this case, the property owners filed a complaint alleging that MERS “had no authority to foreclose on their home because the obligation had been securitized and the investors, who actually own the debt, are unknown.” According to the plaintiffs, the securitization process severed the debt from its security, which, under Utah Code Ann. § 57-1-35, rendered the trust deed unenforceable. MERS claimed it had authority to foreclose because the trust deed “specifically established MERS as beneficiary and ‘nominee for Lender and Lender’s successors and assigns.’”

The court, quoting a Utah Court of Appeals decision, rejected plaintiffs’ argument that § 57-1-35 invalidated MERS’s authority to foreclose, reasoning that the statute “’simply describes the long-applied principle . . . that when a debt is transferred, the underlying security continues to secure the debt.’” In deferring to the Utah Court of Appeals decision, the court here found that Plaintiffs’ argument “’had no legal basis under Utah law’ because even assuming the securitization scheme divested defendant of their implicit authority to foreclose as holders of the trust deeds, ‘the trust deeds explicitly granted Defendants the authority to foreclose’ and § 57-1-35 in no way prohibits such an authorization.” Thus, the court held that Plaintiffs’ claim was without merit and granted MERS’s motion to dismiss.