Tag Archives: lawful assignment

Arizona Court Grants Summary Judgment in Favor of MERS in Show Me the Note Claim

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The Arizona court in deciding the case of Sparlin v. BAC Home Loans Servicing, CA-CV-2010-0173 (Ct. Ap. AzDiv. 2, 2011), had to consider arguments based on the theory of ‘show me the note.’ Sparlin had appealed the lower court decision to grant summary judgment to MERS. Upon reconsideration, the court affirmed the lower court decision and granted summary judgment.

In arguing their ‘show me the note’ claim, the borrowers alleged that MERS was required to actually prove that it was in possession of the original promissory note in order to execute a substitution of trustee appointing Recon-Trust as the substitute trustee and executing an assignment to BAC Home Loans Servicing. These were the documents that allowed the trustee to initiate foreclosure.

The court, in affirming the lower court’s dismissal, found that MERS, as the beneficiary on the deed of trust, had the right to enforce the security instrument. Additionally, the court found that under Arizona law, it was not required of MERS to be the note holder.

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.

Arizona Court Holds That MERS is the Beneficiary With the Authority to Foreclose

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The court in Ciardi v. The Lending Company, Inc. et al., 2010 WL 2079735 (D. Ariz. 2010) held that that MERS is the beneficiary with the authority to foreclose. In doing so the court granted the defendant’s motion to dismiss and motion to vacate temporary restraining order.

In December 2005, plaintiff [Bianca Ciardi] borrowed $270,500 from ‘The Lending Company’ for the purpose of purchasing real property. Plaintiff also executed a promissory note and a deed of trust. Soon after, the plaintiff’s note was sold.

Plaintiff eventually defaulted on their note and their home was nearing auction in a non-judicial trustee’s sale. A lower court granted the plaintiff’s temporary restraining order (“TRO”) without notice. Defendants removed to this court, and sought to have the TRO dissolved and Plaintiffs’ first amended complaint dismissed pursuant to FRCP 12(b)(6).

In their analysis, the court noted, that the Plaintiff’s amended complaint was not the model of clarity and that the plaintiff did not allege any specific causes of action, rather much of their amended complaint was simply a narrative concerning the mortgage securitization industry.

In reaching their conclusion, the court, reviewed the plaintiff’s amended complaint. And concluded that even considering the plaintiff’s pro se status and, in so doing, construing plaintiff’s amended complaint liberally, the court found that the plaintiff failed to state a claim upon which relief may be based. Plaintiff also sought a preliminary injunction to halt the planned foreclosure of their home. However, the court reasoned, in order to obtain preliminary injunctive relief, the moving party must show a likelihood of success on the merits.

Accordingly, because the court found the plaintiff’s amended complaint failed for a failure to state a claim, the court found that the plaintiff failed in showing a likelihood of success on the merits. As such, the Court denied the plaintiff’s request for a preliminary injunction.

MERS’ Assignments are Recognized as Valid as New York Appellate Court Overturns ‘N.Y. v. Alderazi’ & ‘LaSalle v. Lamy’

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In the case of Bank of New York v. Eddie Sachar, et al., 95 A.D.3d 695 (2012), the court found the Bank of New York Mellon had standing to foreclose based on a MERS assignment and the delivery of the note.

The court’s ruling granted the plaintiff’s [Bank of New York Mellon] motion for summary judgment on its complaint against defendant [Sachar]. The plaintiff-bank proved its standing to commence the foreclosure action by demonstrating that it was both the holder or assignee of the subject mortgage and the holder or assignee of the underlying note at the time the action was commenced.

Although the defendant correctly alleged that, although Mortgage Electronic Registration System [MERS] validly assigned the mortgage to plaintiff, and the assignment was properly recorded in the public records, MERS had not been given any interest in the underlying note by the lender (see Bank of N.Y. v Silverberg, 86 AD3d 274, 283 [2011]).

However, the complaint and the documents annexed to plaintiff’s motion establish that an assignment of the note had been effectuated by physical delivery of the note before the current action was commenced.

Arkansas Court Rules That MERS Did Not Violate the State’s Statutory Foreclosure Act

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The court in Coley et al v. Accredited Home Lenders Inc et al (E.D. Ark. 2011) dismissed the homeowner-plaintiff’s claims against MERS pursuant to Federal Rules of Civil Procedure 12(b)(6). In granting MERS’ motion to dismiss the court considered, then rejected the plaintiff’s contentions.

First, the plaintiff alleged that the defendants failed to comply with the notice requirements of 12 U.S.C. 1701x(c)(5), a provision of National Housing Act that requires private lenders servicing non-federally insured home loans to advise borrowers of any home ownership counseling that they of the US Department of Housing and Urban Development may offer. The court however, reasoned that regardless of whether the defendants were in compliance with the act or not, the act does not create a private right of action.

Next, the plaintiff alleged that the defendants violated the state Statutory Foreclosure Act concerning non-judicial foreclosures, and they sought to enjoin the defendants from proceeding with the foreclosure sale. They also sought an order declaring the mortgage’s notice of default and intention to sell, the limited power of attorney, and the corporate assignment of mortgage to be fatally defective and invalid. The court however rejected this contention.

Third, the plaintiffs argued that even if the assignment was valid, the subsequent notice of default and intention to sell was invalid because it was prepared and filed by the Law Offices of Shapiro & Kirsch more than two weeks before HSBC executed a limited power of attorney giving Shapiro & Kirsch the power to act on its behalf. The court rejected this argument, as they noted that whether the notice of default was valid was moot because the non-judicial foreclosure described in the notice was cancelled. Thus, Shapiro & Kirsch would be required by law to file a new notice of default and intention to sell before a sale could take place.

Court Holds That MERS Assignment, in Isolation, Could Not Prove Ownership

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The court deciding In Re Wilhelm (Case No. 06-51747) was faced with the issue of when actual notes prove that the note’s chain of ownership is unclear. In reaching their decision the court found that in such a situation, the MERS assignment could not, on its own, prove ownership of the note.

The court in this case stated that the MERS assignment was legitimate when taken as a whole, along with proper transfer of the note. The court further went on to note “in hundreds of stay relief motions, including many post-Sheridan, creditors are providing adequate documentation and explanation to meet the requisite standing requirements.”

Nevada Court Finds MERS Lacked Standing to Bring Foreclosure Action as it Failed to Establish Itself as a Real Party in Interest and Failed to Provide Sufficient Evidence of it Authority

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In MERS v. Chong, No. 09-661 (D. Nev. 2011) the court affirmed the order from the bankruptcy court holding that MERS lacked standing to bring an action. In the underlying bankruptcy action, MERS filed its motion for relief from stay, seeking to have the automatic stay lifted so that MERS could conduct a non-judicial foreclosure sale.

The court affirmed the bankruptcy court’s determination that MERS was not a beneficiary as MERS failed to present sufficient evidence showing it was a real party in interest. The court found that MERS might have had standing to prosecute the motion in the name of its members as a nominee.

However, in this case there was no evidence that the named nominee was entitled to enforce the note or that MERS was the agent of the note’s holder. As such the court found that MERS lacked standing.