Editor: David Reiss
Brooklyn Law School

April 9, 2013

U.S. Bankruptcy Court of Western District Missouri Holds that Agency Relationship created when MERS is Designated as a Nominee

By Gloria Liu

In re Tucker, 441 B.R. 638 (Bankr. W.D. Mo. 2010), court held that designation of MERS as a nominee in the Mortgage is “more than sufficient to create an agency relationship between MERS and the Lender and its successors in Missouri” and that MERS may exercise any rights that the Lender may exercise under the Mortgage. The case arose from a challenge made by the Chapter 7 trustee. The Trustee asserted that the movant was not the holder of both the Note and Deed of Trust on the date of the bankruptcy filing, that the Note and Deed of Trust were split as of that date, and that the Deed of Trust is now unenforceable. The Debtor had signed an Adjustable Rate Note and a Deed of Trust, which identifies the Lender as “New Century Mortgage Corporation. The Deed of Trust goes on to state that the beneficiary of the Deed of Trust is MERS as “nominee” for the Lender and its successors and assigns.That Deed of Trust was properly recorded with the Recorder of Deeds. While the Note had been assigned several times prior to the bankruptcy, no assignment of the Deed of Trust had been recorded prior to that date. Therefore, as of the date of bankruptcy, the records of the Recorder of Deeds still showed that New Century was the grantee under the Deed of Trust and that MERS, as nominee for New Century, was the beneficiary under the Deed of Trust. Nevertheless, the court concluded that assuming that the note-holder is a member of MERS, thereby creating an agency relationship, the fact that MERS is identified as the beneficiary under a deed of trust for the benefit of the note-holder does not create a split between the note and deed of trust.

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