Editor: David Reiss
Brooklyn Law School

February 14, 2013

Maine Court Holds MERS Lacks Standing, Allows Bank to be Substituted to Prosecute the Foreclosure Action, but Overturns Bank’s Summary Judgment Motion Because of Flawed Procedure

By Abigail Pugliese

In Mortgage Elec. Registration Sys., Inc. v. Saunders, 2 A.3d 289 (Me. 2010), the Supreme Court of Maine holds that (1) MERS lacks standing in the foreclosure action; (2) the substitution of the bank for MERS in the litigation was proper; and (3) summary judgment should not be granted.

In 2006, Mortgagor executed a note and mortgage with Accredited Home Lenders, Inc. (“Accredited”). The mortgage, not the note, mentioned that MERS was nominee for Accredited, had legal interest, and was the “mortgagee.” In 2009, MERS filed a complaint for foreclosure and moved for summary judgment, which was denied by the court. Deutsche Bank National Trust Company (“Bank”) then “moved . . . to substitute itself for MERS in the foreclosure proceedings,” noting that Accredited transferred the note to the Bank and that MERS transferred its interest in the note and mortgage to the Bank. The district court granted the Bank’s motion for substitution of parties, and later, granted the Bank’s motion for summary judgment. Mortgagor appealed.

The court here holds that MERS lacked standing to bring the foreclosure complaint. Despite being identified as a “mortgagee” in the mortgage document, “MERS is not a mortgagee pursuant to 14 M.R.S. § 6321 because it has no enforceable right in the debt obligation securing the mortgage.” Additionally, MERS did not prove it “suffered an injury fairly traceable to an act of the mortgagor and that the injury is likely to be redressed by the judicial relief sought.” Moreover, MERS lacks possession of any interest in the note.

The court also ruled that substitution of the Bank for MERS was permissible under M.R. Civ. P. 17(a) because MERS’s “prosecution of the case in its name is an understandable mistake. Further, the substitution did not “alter the cause of action” or “create any prejudice to the [mortgagors].”

The court also concluded that the district court erred in granting summary judgment “because . . . the flawed procedure . . . led to the court’s entry of foreclosure and sale and because there are genuine issues of material fact.” First, M.R.Civ. P. 52(b) and 52(e) “do not allow for reconsideration or amendment in the absence of a final judgment.” Second, the Bank’s motion to alter or amend did not include reference to the location, or street address, of the mortgaged property, pursuant to 14 M.R.S. § 6321.

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