March 2, 2013
Florida Appellate Court Holds Bank Has Standing to Foreclose because MERS Properly Assigned the Note to it and Lack of Ownership of the Beneficial Interest in the Note Does Not Deprive an Assignee of Standing
In Taylor v. Deutsche Bank Nat. Trust Co., 44 So.3d 618 (2010), the Fifth District Court of Appeal of Florida held Deutsche Bank Nat. Trust Co. (“Deutsche Bank”) had standing to foreclose because MERS properly assigned the note to it and a lack of a beneficial interest in the note does not deprive an assignee of standing in a foreclosure action.
Taylor (“Borrower”) executed a note and mortgage in favor of First Franklin, a division of National City Bank of Indiana (“First Franklin”). The mortgage identified MERS as nominee for First Franklin. MERS, as nominee for First Franklin, assigned the mortgage to Deutsche Bank.
Following Borrower’s default under the note, Deutsche Bank commenced foreclosure, and moved for summary judgment. Borrower argued Deutsche Bank lacked standing to foreclose alleging that the note was not assigned to Deutsche Bank and that the mortgage was not properly assigned to Deutsche Bank. Specifically, Borrower argued that because the note was not indorsed and neither contained an allonge nor a specific assignment, the note was payable to First Franklin, and therefore, Deutsche Bank lacked standing to enforce it. Borrower argued that under Florida Law, only the “holder” in due course could seek foreclosure.
The Court disagreed, however, and held that ownership of a beneficial interest in the note is not required to commence foreclosure. Standing to foreclose may be derived either by being the holder of the note or a nonholder in possession who has the rights of a holder. Here, the mortgage granted MERS the status of a nonholder in possession with the rights of a holder (the case did not elaborate on how MERS came to be in possession of the note). Although MERS was not the party seeking foreclosure, the written assignment explicitly passed the right to enforce the note to Deutsche Bank. As a result, the Court held that MERS properly assigned the note and mortgage to Deutsche Bank, and therefore, Deutsche Bank had standing to foreclose.
March 2, 2013 | Permalink | No Comments
Florida Appellate Court Holds That if MERS was Holder and Owner of Note, it Would Have Standing to Foreclose
In MERS v. Azize, 965 So.2d 151 (2007), the Second District Court of Appeal of Florida reversed the trial court’s dismissal of a foreclosure action with prejudice and remanded because lack of ownership of the beneficial interest in a note does not deprive MERS of standing to foreclose.
In 2004, Azize (“Borrower”) executed a note in favor of Aegis Lending Corporation (“Aegis”). The mortgage identified MERS as mortgagee, and further identified MERS as nominee for Aegis.
In February 2005, MERS filed a complaint seeking to reestablish the note and to foreclose the mortgage. In the complaint, MERS alleged it was the owner of the note and the note had been lost or destroyed after MERS acquired it. MERS argued that because the note was in its possession when it was lost, MERS was entitled to enforce it. The complaint did not allege how MERS came into possession of the note, but Borrower did not contest the allegation and the trial court’s decision was not based on that issue. Instead, the trial court dismissed the complaint with prejudice for failure to state a claim because MERS lacked standing to foreclose since it did not own the beneficial interest in the note. The trial court’s decision was also based on the premise that one corporation cannot serve as the agent for another. MERS appealed.
The Court reversed and remanded. Under Florida Law, the holder of a note has standing to seek enforcement of the note, and standing is broader than simply ownership of the beneficial interest. The Court noted that if MERS could establish a prima facie case that it was the owner and holder of the note and mortgage, it would have standing to foreclose. Furthermore, the Court noted that the trial court’s conclusion that MERS further lacked standing because “one corporation cannot serve as the agent for another corporation” is incorrect.
March 2, 2013 | Permalink | No Comments
U.S. District Court in California Holds MERS has Standing to Foreclose and Dismisses Borrower’s Complaint Against MERS because the Claims were Premised upon MERS’ Lack of Standing
In Germon v. BAC Home Loans Servicing LP, 2011 WL 719591 (S.D.Cal. Feb. 22 2011), the U.S. District Court for the Southern District of California (“Court”) dismissed a borrower’s complaint against MERS and others (“Defendants”) because the borrower failed to state a cause of action.
In 2007, Germon (“Borrower”) executed a note in favor of Countrywide Bank, FSB (“Countrywide”). The Deed of Trust identified ReconTrust (“Recon”) as the Trustee and MERS as the beneficiary.
On May 4, 2010, following Borrower’s default under the note, Recon duly recorded a notice of default. On May 6, 2010, MERS assigned its beneficial interest in the note to BAC Home Loans Servicing, LP (“BAC”). On August 11, 2010, Recon duly recorded a notice of trustee’s sale, which was set for September 3, 2010. Borrower then requested to modify the loan, and BAC agreed to postpone the sale until October 1. Ultimately, BAC denied Borrower’s request for loan modification, and on October 1, BAC purchased the property at the trustee’s sale.
Thereafter, Borrower filed a complaint seeking to set aside the trustee’s sale, cancel the trustee’s deed and quiet title in Borrower. In its complaint, Borrower alleged, inter alia, breach of contract, breach of the implied covenant of good faith and fair dealing (“implied covenant”), and violations of the Federal Fair Debt Collection Practices Act (“FDCPA”) and Truth in Lending Act (“TILA”). The Court dismissed the complaint in its entirety for failure to state a claim.
The Court dismissed Borrower’s claims to set aside the trustee’s sale, cancel the trustee’s deed and quiet title because each claim rested upon the erroneous premise that MERS lacked authority to foreclose and to assign its beneficial interest in the note to BAC. First, the Court held the deed of trust clearly granted MERS authority to initiate foreclosure and to assign that right. Second, the Court rejected Borrower’s argument that only the “holder of the note” can initiate foreclosure because under California Law, the “trustee, mortgagee, or beneficiary” may institute nonjudicial foreclosure like the one in the present case. The Court also noted that Borrower failed to tender the balance of the unpaid debt, which is a prerequisite for claims to set aside a Trustee’s Sale and cancel a Trustee’s Deed.
Similarly, the Court dismissed Borrower’s claims alleging breach of contract and breach of the implied covenant because they too were based upon the erroneous premise that MERS lacked standing to foreclose and to assign its beneficial in the note.
Borrower also alleged BAC breached the implied covenant by “mishandling” Borrower’s financial data when reviewing the loan modification request, and by denying the request without allowing Borrower to resubmit the correct data prior to the foreclosure sale. The Court dismissed this claim because absent an express contractual term requiring loan modification, the Borrower could not create the obligation by alleging a breach of the implied covenant.
The Court dismissed Borrower’s FDCPA claim because it too relied upon the erroneous premise that MERS lacked standing to foreclose.
Finally, the Court dismissed Borrower’s TILA claim because it was time-barred by the one-year statute of limitations.
March 2, 2013 | Permalink | No Comments
Arkansas District Court Holds MERS’s Note Assignment Valid and Gives Purchaser Standing to Appoint Agent to Initiate Foreclosure
In Peace v. MERS, 2010 WL 2384263 (E.D. Ark. June 11, 2010), the court held that MERS’ assignment to Note purchaser was valid and properly gave purchaser standing to appoint an agent to initiate a non-judicial foreclosure. The promissory note provides that in return for a loan received from American Home Mortgage, Peace will pay the principal sum of $56,000.00. The mortgage names Defendant MERS as mortgagee, solely as the nominee for AHM, and grants MERS and its successors and assigns the power to sell the property. MERS later assigned the mortgage to BAC Home Loan Servicing. Therefore, since BAC was the holder of the note and mortgage, and ReconTrust was acting as agent of BAC and not on behalf of MERS, BAC had standing to initiate a non-judicial foreclosure.
March 2, 2013 | Permalink | No Comments
Arkansas Supreme Court Holds that MERS is Not a Beneficiary and Not a Necessary Party in Foreclosure Proceedings
In MERS, Inc. v. SouthWest Homes of Ark., Inc., , 301 S.W.3d 1 (Ark. 2009), the court held that MERS was at most the mere agent of the lender Pulaski Mortgage Company, Inc., and thus held no property interest and was not a necessary party in foreclosure proceedings. The borrowers entered into a deed of trust on a one-acre lot in Benton County to secure a promissory note. The lender on that deed of trust was Pulaski Mortgage, the trustee was James C. East, and the borrowers were the Lindseys. MERS was listed on the deed of trust as the “Beneficiary” acting “solely as nominee for Lender,” and “Lender’s successors and assigns.” The second page of the deed of trust states “the Borrower understands and agrees that MERS holds only legal title to the interests granted by the Borrower and further that MERS as nominee of the Lender has the right to exercise all rights of the Lender including foreclosure.” The deed of trust was recorded. The borrowers later granted the subject mortgage on the same property to Southwest Homes of Arkansas, Inc. to secure a second promissory note. The court emphasized the fact that Arkansas was a recording state and noted that all the required parties to a deed of trust under Arkansas law are present, the borrower in the Lindseys, the lender in Pulaski Mortgage, and the trustee in James C. East. Under a deed of trust in Arkansas, title is conveyed to the trustee and here, MERS was neither a trustee nor a beneficiary. Moreover, no payments on the underlying debt were ever made to MERS. MERS did not service the loan in any way. It did not oversee payments, delinquency of payments, or administration of the loan in any way. The court thus held that it was at most an agent to the lender, but had no further rights to standing.
March 2, 2013 | Permalink | No Comments
Circuit Court of Arkansas Holds that MERS has Standing to Foreclose because Ownership of Note is not Required to have Standing
In MERS, Inc. v. Stephanie Gabler, et al., (Circuit Court of Garland County # 2004-17-II), the court held MERS had standing to seek relief for its Writ of Assistance and is proper party to foreclose the mortgage because it was the mortgagee of record and holder of the promissory note. The borrowers claimed that MERS did not have standing because MERS was not the owner of the note but the court found that ownership of the note is not required to have standing.
March 2, 2013 | Permalink | No Comments
Kansas Court of Appeals Holds that Severance of Mortgage and Note Cured by Subsequent Assignment of Mortgage from MERS to Bank
In U.S. Bank v. Howie, 280 P.3d 225 (Kan. App., 2012), the court held that U.S. Bank had standing to foreclose because there was an agency relationship between MERS and U.S. Bank. It also upheld that severance can be cured by MERS’s subsequent assignments. Therefore, it falls under the agency relationship exception of unenforceability when the mortgage is not held by the same entity that holds the promissory note. The homeowner, James Howie executed a promissory note to U.S. Bank and executed a mortgage on real property they owned in Ottawa. Under the terms of the mortgage, the Howies were named as the borrower, U.S. Bank as the lender, and MERS was named as the mortgagee “acting solely as a nominee for Lender and the Lender’s successors and assigns.” The mortgage stated: “Borrower understands and agrees that MERS holds only legal title to the interests granted by Borrower in this [Mortgage], but, if necessary to comply with law or custom, MERS (as nominee for Lender and Lender’s successors and assigns) has the right: to exercise any or all of those interests, including, but not limited to, the right to foreclose and sell the Property; and to take any action required of Lender including, but not limited to, releasing and canceling this [Mortgage.]:” When the note entered into default following James’ death, MERS assigned the mortgage to U.S. Bank, which subsequently filed an action to foreclose the mortgage. The lower court held that even if there was no agency relationship between MERS and U.S. Bank such that the note and the mortgage were severed, any severance was cured by MERS’s subsequent assignment of the mortgage to U.S. Bank. The Appellate court agreed but also found that according to the plain language of the Mortgage, MERS was acting as an agent of U.S. Bank at all relevant times.
March 2, 2013 | Permalink | No Comments
