Tag Archives: stay foreclosure

U.S. District Court for the District of Arizona Found the Mere Use of MERS Nid Not Constitute Common Law Fraud

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The U.S. District Court for the District of Arizona, in Cervantes v. Countrywide Home Loans, Inc., et al., No. 09-cv-00517 (D.Ariz. 2009), dismissed all state and federal claims brought by all three of the borrowers. The borrowers filed a complaint against MERS as well as a group of other defendants

After considering the borrowers’ arguments, the court found the mere use of MERS did not constitute common law fraud on the borrowers. The court found that the plaintiffs had failed to allege what effect, if any, listing the MERS system as a ‘sham’ beneficiary on the deed of trust had upon their obligations as borrowers.

Subsequently, the United States Court of Appeals for the Ninth Circuit affirmed the trial court’s judgment in favor of MERS. Accordingly, the Court held that a borrower lacked the basis to challenge the standing of an entity such as MERS. Further, the court, however, drew attention to a legal reference that such a borrower still had legal recourse by bringing an action to have the trustee’s sale set aside.

Alabama Court Holds That MERS’ Assignment to Current Servicer of the Mortgage Loan was Valid

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The Alabama court in Mortensen v. MERS et al, S.D. Ala. No. CV10-234-S (2010) after considering both arguments, granted summary judgment to MERS as well as all defendants.

The court found that the borrower, from his own volition, knowingly and willingly gave a mortgage interest in the property to MERS. The court also found that the mortgage in this case expressly stated that MERS was the mortgagee under the security instrument.

Accordingly, the court held that the MERS’ assignment to the current servicer of the mortgage loan was valid and assigned all MERS’ interest in the mortgage to the servicer.

Court of Civil Appeals of Alabama, in Favor of Borrower, Vacates and Dismisses Judgment

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The court in Nelson v. Federal National Mortgage Association, 97 So.3d 770 (2012) the Court granted Fannie Mae’s summary judgment as to its ejectment action against the borrower because the Court found that Fannie Mae received valid title to the property from MERS subsequent to the foreclosure sale conducted by MERS. However, on appeal, court of civil appeals of Alabama vacated the lower court’s judgment and dismissed the appeal.

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The court of civil appeals reversed a decision by the lower court holding that under the state’s law MERS had the power and authority to conduct the foreclosure sale in its own name and the special warranty deed from MERS to Fannie Mae was valid and gave Fannie Mae superior legal title to the property. On appeal this was reversed.

Likewise, the lower court also originally held that an assignment of mortgage from MERS to the servicer was unnecessary for MERS to proceed with the foreclosure on behalf of the servicer. Accordingly the court of civil appeals also vacated this.

Alabama Court Rules That Demonstration of Note Ownership is Not Needed

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The court in Farkas v. SunTrust Mortgage, Inc, et al., 447 F. App’x 972 (11th Cir. 2011) found that Alabama is a non-judicial foreclosure state and that the party seeking foreclosure was not required to demonstrate ownership of the promissory note before taking action on the corresponding mortgage. This action involved MERS as the foreclosing mortgagee.

The debtor claimed that Article 3 of the Uniform Commercial Code (UCC) required that the party seeking foreclosure had to prove an interest in the note. However, the court reasoned that the UCC was not relevant to non-judicial foreclosure proceedings.

Hawaiin Court Rejects Plaintiff’s Allegations of Fraud Against MERS and Grants Summary Judgement

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The court in Sakugawa v. MERS et al, D. Hawaii, 1:10-cv-00028 (Feb. 25, 2011) granted summary judgment in favor of MERS. Thus rejecting the plaintiff’s accusations for fraud and claims of state law violations regarding loan origination.

The court also found that MERS was not involved in the loan origination process and was not in contact with the plaintiff regarding the transaction. Thus the court found that there was no basis to find that MERS committed any fraudulent, unfair or deceptive acts regarding the loan consummation.

The Court found that MERS was the correct mortgagee under the security instrument, thus the mortgage permitted MERS to foreclose and sell the property.

Pennsylvania Appellate Court Affirms MERS’ Standing to Foreclose

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The Pennsylvania appellate court in MERS v. Estate of Harriet L. Watson, et al., Superior Court of Pennsylvania # 637 WDA (2006), affirmed the standing of MERS to foreclose.

The case involved counter-claims as well as affirmative defenses filed by the estate of a deceased borrower in response to a foreclosure suit brought by MERS in 2003. The estate’s defenses and counter-claims included the theory that MERS, in someway, lacked standing because it was not the “real party-in-interest.” Moreover, MERS could not bring a foreclosure suit in Pennsylvania since it did not register as a foreign corporation doing business in Pennsylvania.

After consideration of the estate’s claims, the appellate court disregarded the estate’s challenges to MERS standing to foreclose due to the clear language of the mortgage itself. The court then held that MERS was not required to register as a foreign corporation because the act of acquiring, recording, or enforcing a mortgage lien constituted a specific exception under 15 Pa.C.S.A. § 4122 to the general requirement that companies “doing business” in Pennsylvania must obtain a certificate of authority in order to file suit in Pennsylvania. Such actions, by statutory definition, do not constitute “doing business.”

Illinois Federal Appellate Court Rules That MERS Had Sufficient Authority to Commence Foreclosure Proceeding in its Capacity as an Agent

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The federal appellate court in MERS v. Estrella, 390 F.3d 522 [7th Cir. 2004] ruled that MERS had a sufficient authority to commence a foreclosure proceeding, in its capacity as an agent on behalf of its principal.

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At issue in this case was an application to confirm a sale. On appeal, the court dismissed the appeal based upon well-established law that Court orders denying confirmation to judicial sales are not final decisions, and thus are not appealable.

Additionally, implicit in the court’s holding was recognition that MERS has standing to commence a foreclosure proceeding as agent on behalf of its principal. Indeed, the Estrella Court did not dismiss the proceeding in its entirety for lack of standing by the agent, rather cited to Indiana Gas Co. v. Home Insurance Co., 141 F.3d 314, 319 [7th Cir. 1998] which recognized the capacity of an agent to commence a proceeding “[w]hen the principal’s interests are affected by the litigation, the principal’s citizenship counts even if the agent is the sole litigant.”

The federal appellate court did not issue a blanket ban to suits commenced by MERS as an agent on behalf of its principals. Instead, in suits brought by agents, it directs federal district courts to ascertain the citizenship of the principal of the plaintiff to determine whether federal diversity jurisdiction exists.