Editor: David Reiss
Brooklyn Law School

February 12, 2013

Federal District Court in Virginia Rules for Lender/MERS in Foreclosure Case

By Rafe Serouya

In Merino v. EMC Mortgage Corporation, et. al., CIV.A 1:09-CV-1121, 2010 WL 1039842 (E.D. Va. Mar. 19, 2010), Plaintiff Homeowners executed two notes, and after defaulting filed suit alleging claims under the Fair Debt Collection Practices Act, claims for declaratory judgment, and quiet title. Plaintiffs challenged the authority of the various Defendants to enforce the deeds and notes that had been transferred. The Court stated that under Virginia law, “the holder of an instrument or a nonholder in possession of the instrument with the same rights as the holder may enforce the instrument.” Additionally, “absent a contrary provision, notes are generally freely transferable, and the transferee retains the right to enforce the instrument.” The Court found that “Plaintiffs offered no allegation that they reached an agreement with a noteholder or took any other action which would suffice to discharge the obligation under Virginia law.” Furthermore, as seen in many cases, the court held that the “split” of the deeds from the notes did not render the deeds unenforceable, and under Virginia law, “when a note is assigned, the deed of trust securing that debt necessarily runs with it.” The Court agreed with the finding in a similar cases that there is no basis to support Plaintiffs’ contention that because the default by Plaintiffs “triggered insurance for any losses caused” they are “discharged from the promissory notes and the Property is released from the deeds of trust. The declaratory relief count was dismissed for the same reason as in Horvath, which was that the foreclosure had already occurred. Declaratory judgment is a forward looking mechanism and would therefore serve no purpose here. Finally, the quiet title claim was dismissed because Plaintiffs offered no plausible basis on which the Court can conclude that they possessed good title to the property.

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