Tag Archives: Mortgage Electronic Recording System

California Court Finds that MERS Was Not Liable for Wrongful Foreclosure, Breach of Contract, and Breach of the Implied Covenants of Good Faith and Fair Dealing

Posted on by

The United States District Court for the Central District of California hearing Gaitan v. MERS, et al, 09-1009 (C.D. Cal. 2009) found that MERS had the right to initiate foreclosure proceedings. The court also found that MERS was not liable for claims including wrongful foreclosure, breach of contract, and breach of the implied covenants of good faith and fair dealing.

The plaintiff alleged that several flaws in the documents he received proved the mortgage loans were obtained by fraud. Specifically, he alleged that neither the adjustable rate mortgage loan documents nor the truth in lending disclosure statement “clearly and conspicuously disclosed”: (1) the actual interest rate on which the scheduled payments were based; “(2) that making the payments according to the payment schedule listed in the TILD will result in negative amortization and that the principal balance will increase; and (3) that the payment amounts listed on the TILD are insufficient to pay both principal and interest.”

The plaintiff alleged that not only were the disclosure statements “unclear and inconspicuous,” but they were “deceptive” and “based in order to mislead and deceive plaintiff into believing that he would be getting a loan with a low fixed payment rate that would be sufficient to pay both interest and principal.” The court examined each of the claims in the plaintiff’s argument in turn, and determined that the plaintiff failed to argue the viability of any of the claims.

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

Posted on by

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

Posted on by

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

Posted on by

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 Rules That MERS, as the Beneficiary on the Deed of Trust, Had the Authority to Make a Substitution of Trustee

Posted on by

The United States District Court of the Northern District of California in deciding Lomboy v. SCME Mortgage Bankers, Inc. et al, No. C-09-1160 SC (N.D. Cal. 2009) held that under California law, MERS was not required to register to do business in California. The court also ruled that MERS is able to foreclose.

As her first cause of action, Plaintiff sought declaratory relief against SCME, MERS, Quality, and Aurora. Plaintiff asserted that she was the true equitable owner of the house, that the defendants were not holders of the promissory note, which should accompany the deed of trust, and that MERS has no right to foreclose on the house.

Plaintiff Imelda Lomboy also brought an action alleging various improprieties surrounding the then-imminent foreclosure of property that was used as security for a loan. Plaintiff alleges that the defendants “fraudulently obtained the deed of trust.”

The court in rejecting the plaintiff’s contentions note that MERS, as the beneficiary on the deed of trust, had the authority to make a substitution of trustee. The court further noted, that the substitute trustee appointed by MERS was able to carry out the foreclosure.

Northern District of California Rules That MERS Had the Authority to Appoint a Substitute Trustee

Posted on by

The United States District of the Northern District of California dismissed fraud claims brought by plaintiff against MERS in Labra v. Cal-Western Reconveyance Corp., No. C 09-02537 PJH (C.D. Cal. 2010). The court also denied the plaintiff’s request for injunctive relief.

The Northern District of California court affirmed the lower court’s ruling that MERS had the authority to appoint a substitute trustee after finding that the deeds of trust explicitly stated that MERS was the nominal beneficiary under the deeds of trust. Further, it also provided that MERS had the right to foreclose and sell the property as well as take any action that a lender could take.

California Court Finds That Under State Civil Code Section 2924(a), MERS Had the Right to Foreclose

Posted on by

The United States District Court for the Northern District of California Oakland Division in deciding Earl A. Dancy v. Aurora Loan Services, LLC, No: C10-2602 SBA (2010) found that the plaintiff’s contentions lacked merit.

The court found that the plaintiff’s assertion that neither the loan servicer nor MERS were the true beneficiaries of the subject deed of trust and therefore had no authority to institute foreclosure proceedings, lacked merit. The court held that the deed of trust expressly designated that MERS was acting solely as nominee for the lender and the lender’s successors and assigns.

Further, the court held that regardless of whether or not MERS owned the note or was entitled to any payments as a result, the fact remained that the deed of trust designated MERS as a beneficiary. Thus, under section 2924(a) of the California Civil Code, MERS had the right to foreclose.