Editor: David Reiss
Brooklyn Law School

August 25, 2013

Illinois Federal Appellate Court Rules That MERS Had Sufficient Authority to Commence Foreclosure Proceeding in its Capacity as an Agent

By Ebube Okoli

The federal appellate court in MERS v. Estrella, 390 F.3d 522 [7th Cir. 2004] ruled that MERS had a sufficient authority to commence a foreclosure proceeding, in its capacity as an agent on behalf of its principal.

At issue in this case was an application to confirm a sale. On appeal, the court dismissed the appeal based upon well-established law that Court orders denying confirmation to judicial sales are not final decisions, and thus are not appealable.

Additionally, implicit in the court’s holding was recognition that MERS has standing to commence a foreclosure proceeding as agent on behalf of its principal. Indeed, the Estrella Court did not dismiss the proceeding in its entirety for lack of standing by the agent, rather cited to Indiana Gas Co. v. Home Insurance Co., 141 F.3d 314, 319 [7th Cir. 1998] which recognized the capacity of an agent to commence a proceeding “[w]hen the principal’s interests are affected by the litigation, the principal’s citizenship counts even if the agent is the sole litigant.”

The federal appellate court did not issue a blanket ban to suits commenced by MERS as an agent on behalf of its principals. Instead, in suits brought by agents, it directs federal district courts to ascertain the citizenship of the principal of the plaintiff to determine whether federal diversity jurisdiction exists.

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