Editor: David Reiss
Brooklyn Law School

January 10, 2013

General Challenge to MERS Rejected by Texas Federal District Court

By Karl Dowden

The United States Southern District Court of Texas defended MERS in Richard v. CIT Group, et al., No. H-12-848 (S.D. Tex Jul. 21, 2012). The plaintiff’s attorney challenged the standing of the defendants and the use of MERS. The plaintiff argued that her confusion about the identity of the holder of the note should be evidence towards lack of standing. The Court notes that the plaintiff never received overlapping or conflicting mortgage bills. In addition, the allonge to the note named the defendant as the rightful holder of the note, showing that the defendant has standing.

The plaintiff also mentioned a number of criminal acts that MERS has committed, but failed to make a specific claim against the institution. The Court then stated that MERS is a tool used for efficiency to lower the cost of borrowing. In addition, those who borrow money to purchase a house through issuing a negotiable note cannot object to its being negotiated or to the effective process for documenting them (in the context of Texas commercial law, the term negotiate is defined as the “transfer of possession … of an instrument by a person other than the issuer to a person who thereby becomes its holder”) (Tex. Bus. & Com. Code Ann. § 3.201(a) (West 2002)).

The Court granted the defendants’ motion of summary judgment after dismissing the plaintiff’s claims.

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