Tag Archives: Downstream Litigation

Washington Court Rejects Plaintiff’s Claims That MERS’ Assignment was Fraudulent

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The Washington court in Bain v. Metropolitan Mortgage Group, Inc., 2010WL891585 (W.D. Wash. Dist. Ct., March2010), rejected the plaintiff’s contentions that an assignment by MERS was executed fraudulently.

The plaintiff based his claims around the execution of a mortgage assignment by a person designated as an officer of MERS, but who was not also a MERS employee.

The court, in rejecting the plaintiff’s arguments that the assignment was executed fraudulently, noted that the non-employee signors did not commit an affirmative misrepresentation of fact, because of the fact that, for purposes of signing the papers, the non-employee signors misrepresented nothing: [the IndyMac signor] and [the MERS signor] did bear the titles that they used. The employees’ use of the titles was expressly authorized by contracts with IndyMac and MERS.

Thus there was nothing deceptive about using an agent to execute a document, and the court also noted that such practice is commonplace in deed of trust actions.

Texas Court Plaintiff’s Challenges the Authority of MERS to Assign its Lien Interest to a Successive Party

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The Texas court in Eskridge v. Federal Home Loan Mortg. Corp., No. 6:10-CV-285, (W.D. Tex., 2011) dismissed Plaintiff’s claims to challenges the authority of MERS to assign its lien interest to a successive party.

The plaintiff unsuccessfully argued that she had superior title because the note as well as the deed of trust was split. Further, plaintiff alleged that MERS lacked authority under the note to transfer either the note and/or the deed of trust. Consequently, any transfer made by MERS in regard to the Note to BAC was allegedly void.

However, the court determined that the plaintiff lacked standing to contest the various assignments, as she was not a party to the assignments. The court further reasoned that even if she had standing, her allegations were without merit because MERS was given the authority to transfer the documents in the deed of trust.

United States District Court Dismisses Plaintiff’s Contentions Against MERS, Alleging Wrongful Foreclosure and Unfair Business Practices

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The United States District Court for the Northern District of California in deciding Pantoja v. Countrywide Home Loans, et al. 5:09cv016015 (N.D. Cal., 2009) affirmed MERS’ authority to foreclose. MERS’ ability to foreclose was again affirmed in this case, contrary to plaintiff contentions alleging wrongful foreclosure, unfair business practices, failure to disclose information regarding the plaintiff’s loan, claims arising under TARP, and various violations of state law related to the Notice of Default and the trustee sale.

The Court granted MERS’ motion to dismiss on several grounds. One ground was that the court concluded that the plaintiff lacked standing to bring the suit because he failed to tender the amounts due and owing under the note. The court also held that the plaintiff did not have a private right of action under TARP, and that his claims for unfair business practices were not supported by any facts.

The court also denied the claims for wrongful foreclosure. Accordingly, the court found that under state law, there was no requirement for the production of an original promissory note prior to the initiation of a non-judicial foreclosure. So, the absence of an original promissory note in a non-judicial foreclosure does not render a foreclosure invalid.

California Court Held That State Law Did Not Require Possession of the Note as a Precondition for Initiating a Foreclosure Sale

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The Los Angeles County Superior Court in deciding Linares, et al. v. JLM Corporation, et al., No. YC060372 (2009), after considering the plaintiff’s contentions, rejected them in favor of the defendant’s argument. In accepting the defense’s argument, the court held that California law did not require the possession of the original note as a precondition for initiating a foreclosure sale.

Additionally, the court found that under California law, an “allegation that the trustee did not have the original note or had not received it, is insufficient to render the foreclosure proceeding invalid.”

California Court Rules That MERS Did Not Breach the Implied Covenant of Good Faith By Initiating Non-Judicial Foreclosure

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The United States District Court for the Northern District of California in Winter v. Chevy Chase Bank, No. C 09-3187 SI (N.D. Cal. 2009) found that despite the plaintiff’s allegations, MERS had not committed negligence or breached the implied covenant of good faith and fair dealing when it initiated non-judicial foreclosure proceedings against the plaintiff.

Plaintiff Gwendolyn Winter initiated an action in state court against defendants Chevy Chase Bank, Gabrielle Benedetto; U.S. Bank N.A. as Trustee for CCB Libor Series 2005-C Trust; MERS; as well as several unnamed defendants. The plaintiff alleged federal and state law claims related to the mortgage, mortgage default, foreclosure, and sale of plaintiff’s primary residence.

Plaintiff also filed suit against defendants in alleging negligence; breach of contract; breach of fiduciary duty; intentional infliction of emotional distress; fraud and misrepresentation; violations of state and federal lending laws; false advertising and unfair competition under federal and state law; and federal RICO violations. However, after considering the plaintiff’s contentions, the court eventually dismissed the claims.

United States District Court for the Central District of California Finds hat MERS Was the Beneficiary and Entitled to Foreclose

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The United States District Court for the Central District of California in Derakhshan v. MERS, No. SACV08-1185 AG (2009) found that MERS was the beneficiary and therefore entitled to foreclose. This case, like many others before this court, involved the sale of an option adjustable rate mortgage loan.

The court held that MERS was the named beneficiary in the deed of trust. By signing the deed, the plaintiff thus agreed that MERS would be the beneficiary and act as nominee for the lender. Further, the deed explicitly stated that the borrower understood and agreed that MERS held only legal title and had the right: to exercise any or all of those interests, including but not limited to, the right to foreclose and sell the property.

Thus, the plaintiff explicitly authorized MERS to act as beneficiary with the right to foreclose on the property.

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.