Tag Archives: assignment

Court Rules That When MERS Assigned its Interest, it Did Not Commit Negligence Against the Borrower

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The United States District Court of the Eastern District of California in deciding Baisa v. Indymac, MERS, et al, No. Civ. 2:09-1464 (E.D. Cal. 2009), found that MERS had the right to execute an assignment of the deed of trust and was not a debt collector for the purposes of California’s Rosenthal Act. The act of assigning a deed of trust did not constitute debt collection.

Plaintiff’s first cause of action alleged that MERS and other defendants violated the Rosenthal Fair Debt Collection Practices Act (“RFDCPA” or “Rosenthal Act”), 1 Cal. Civ. Code §§ 1788 et seq. (SAC 9.). However the court found that plaintiffs failed to plead facts necessary to support the inference that MERS is a “debt collector” under the RFDCPA; specifically, that MERS engages in “debt collection,” that the deed of trust memorializes a “consumer credit transaction,” and that the amount owed under the deed of trust is a “consumer debt” according to the RFDCPA

Furthermore, the court found that when MERS assigned its interest, it did not commit negligence against the borrower nor make a misrepresentation or fraudulent claim to the borrower.

Court Holds That California State Law Did Not Require Possession of the Note to Commence a Non-Judicial Foreclosure

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The court in Chilton v. Federal National Mortgage Association, No. 1:09-cv-02187-OWW-SKO (2010), held that California state law did not necessitate possession of the promissory note in order to proceed with a non-judicial foreclosure.

The court dismissed the plaintiff’s complaint, after hearing the plaintiff’s arguments alleging wrongful foreclosure and lack of standing. Even though MERS was not named as a party to the action, the plaintiff argued that based on recent Kansas case law, MERS did not have standing to foreclose since the note and deed of trust had been separated.

The court distinguished Kansas’s recent precedent from this case in that the court held that Kansas’s case law did not consider the requirements of California’s non-judicial foreclosure process.

Court Holds MERS’ Previous Business Activities Prior to Proper Registration in California Did Not Render its Foreclosing Illegal

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The court in Perlas et al v. MERS, No. C 09-4500 (N.D.Cal. 2010) held that MERS’ previous business activities prior to becoming registered to do business in California did not render its foreclosing activities illegal.

Despite the plaintiff’s arguments to the contrary, the court noted that since MERS is now registered in California any alleged error had since been retroactively fixed. The Court in delivering their holding also noted that MERS, acting as the lender’s agent, had the authority to initiate non judicial foreclosures.

California Court of Appeals Holds That the Right to Challenge a Nominee’s Authority to Foreclose on Behalf of Note Holder Would Fundamentally Undermine the Non-Judicial Nature of the Process

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The Fourth District California Court of Appeals in considering Gomes v. Countrywide Home Loans, Inc., 192 Cal.App.4th 1149 (2011), affirmed the lower court’s decision upholding MERS’ ability to initiate non-judicial foreclosure actions.

The appellant argued that he was entitled to bring a lawsuit to challenge whether MERS was authorized to initiate a foreclosure action, however the California Court of Appeals rejected this argument. In rejecting the appellant’s argument, the court held that the text of the statue failed to provide a judicial action to determine whether the person initiating the foreclosure process is indeed authorized. Further, the court noted that there were no grounds for implying such an action.

The Court found that “the recognition of the right to bring a lawsuit to determine a nominee’s authorization to proceed with foreclosure on behalf of the note holder would fundamentally undermine the non-judicial nature of the process and introduce the possibility of lawsuits filed solely for the purpose of delaying valid foreclosures.”

Arizona Court Affirms a Lower Court Decision That Possession of Note Was Not Needed for a Party to Initiate a Non-Judicial Foreclosure

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The Arizona court in Maxa v. Countrywide Loans, Inc., 2010 WL 2836958 (D. Ariz. 2010) affirmed a lower court decision that possession of the note was not needed for a party to initiate a non-judicial foreclosure. The court also affirmed that MERS had the authority under the deed of trust to commence foreclosure.

The court in reaching their decision rejected the plaintiff‘s claim that the defendants lacked the right to enforce the note; therein making the foreclosure was invalid. The court noted that a trustee’s sale was not an action to enforce the note, but rather it was an exercise of the power of sale upon default.

The court explicitly held that Arizona law bestowed power of sale on the trustee upon default or breach of the contract secured by the trust deed without reference to enforcing or producing a note or other negotiable instrument.

The court in reaching their decision also found that the plaintiff not only gave the power of sale to the trustee, but also agreed to empower MERS, as the lender’s nominee, to exercise the right to foreclose. Lastly, the court directly rejected the plaintiff’s claims of fraudulent misrepresentation based upon the notion that MERS was not a valid beneficiary.

The United States District Court for the District of Arizona Reasons That the Plaintiff Agreed to Empower MERS to Foreclose

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The United States District Court for the District of Arizona, in Silvas v. GMAC Mortgage, LLC, et al., cv00265 (AZ Dist., 2009), reaffirmed MERS’ standing as the beneficiary of a deed of trust.

In the present case, the plaintiff brought a host of claims against the defendant. One such claim included conspiracy to commit fraud by making use of the MERS System. The court considered the plaintiff’s arguments, however the court rejected them. In rejecting the plaintiff‘s contentions, the court found that they were not only inaccurate, but that the claims were also insufficient to support the plaintiff’s assertions.

The court also reasoned that the plaintiff agreed to empower MERS to foreclose. In reaching this conclusion the court noted that the deed of trust designated MERS as the beneficiary, and authorized MERS to take any action to enforce the loan. One such right included the power to foreclose.

The United States District Court for the District of Arizona Finds That the Borrower Gave MERS the Ability to Take Any Action, Which the Lender Would be Able to Take

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The United States District Court for the District of Arizona, in Blau v. America’s Servicing Company, et al, No. CV-08-773 (D. Ariz., 2009), acknowledged that MERS, acting as a beneficiary, was the proper party to execute an assignment of the deed of trust.

The borrower gave MERS the ability to take any action, which the lender would be able to take. Thus, this included the ability to assign, foreclose, and even substitute the trustee. The court also found that MERS had no liability under The Truth in Lending Act (TILA) since it had not been involved in making the loan to the plaintiff.