January 30, 2013
Rhode Island Superior Court Addresses Challenged to MERS
One of the earliest opinions addressing challenges to MERS in Rhode Island is Bucci v. Lehman Bros. Bank, No. PC-2009-3888 (R.I. Sup. August 25, 2009).
The plaintiff challenged MERS’s standing to foreclose on their house following the plaintiff’s default on their mortgage. The mortgage contained a provision granting the lender the statutory power of sale. The plaintiff requested a declaratory judgment and injunction relief by canceling the foreclosure sale of their house.
The plaintiffs argued that the mortgage agreement does not authorize MERS to foreclose by power of sale. They argue that the provision granting the lender the statutory power of sale specifically limits the ability to foreclose to the original lender, which is the Lehman Brothers Bank. However, the court found additional language in the mortgage agreement that expressly named MERS the nominee and granted MERS the right to invoke the statutory power of sale. The court also found that opinions from other jurisdictions outside of Rhode Island which addressed the issue have also supported the ability of MERS to foreclose as mortgagee and nominee for the beneficial owner of the note.
An additional statutory challenge was addressed by the court as well. The plaintiffs argued that a number of statutes implicitly prohibited MERS from foreclosing as a mortgagee in a nominee capacity. The plaintiffs argued that the term “mortgagee” in the statutes was intended to apply only to the lender. However, the court dismissed this as a narrow interpretation which “would undermine the role of servicers in the mortgage lending industry.”
As a result, the court dismissed the plaintiff’s request for declaratory and injunctive relief and held that MERS had standing foreclose the plaintiff’s mortgage.
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