March 19, 2013
U.S. District Court in Oregon Dismisses Borrower’s Claims Against Defendant Financial Institutions and Holds MERS Valid Beneficiary Under Deed of Trust
In Beyer v. Bank of America, 800 F.Supp.2d 1157 (2011), the U.S. District Court for the District of Oregon dismissed a borrower’s complaint against defendant financial institutions in its entirety and held MERS was a valid beneficiary under a deed of trust.
In June 2006, Beyer (“Borrower”) executed a note and deed of trust. The deed of trust named MERS as the beneficiary and Fidelity National Title Insurance (“Fidelity”) as the trustee.
In December 2009, MERS assigned its beneficial interest in the deed of trust to Deutsche Bank National Trust Company (“Deutsche Bank”). The deed of trust and the assignment were both duly recorded.
Thereafter, Borrower filed suit to prevent foreclosure and moved for a temporary restraining order (“TRO”)(the case did not describe the events surrounding the foreclosure other than those specified above). Defendant financial institutions moved to dismiss the complaint for failure to state a claim. The Court denied Borrower’s motion for a TRO and granted defendants’ motion dismissing the complaint in its entirety.
Borrower asserted four claims in the complaint, and the Court addressed them in turn:
First, Borrower argued defendants could not proceed with foreclosure without first presenting the promissory note. The Court dismissed this claim because under Oregon Law, defendants were not required to present the note as part of the foreclosure process. The statute requires only presentation of the deed of trust in a nonjudicial foreclosure, such as the one in this case.
Second, Borrower argued the deed of trust was null and void because it had been separated from the note, and therefore, Deutsche Bank (assignee of the beneficial interest in the deed of trust) was not entitled to foreclose. The Court dismissed this claim because the Oregon Supreme Court has expressly permitted foreclosure where the deed of trust and note had been separated and later rejoined.
Third, Borrower argued defendants committed fraud by naming MERS as the beneficiary because under Oregon Law, MERS is not a beneficiary. If Borrower’s claim were true, then MERS could not have validly assigned the deed of trust to Deutsche Bank.
The statute defines “beneficiary” as “the person named or otherwise designated in a [deed of trust] as the person for whose benefit a [deed of trust] is given.” One line of cases interpreting this statute holds that because MERS was named as the beneficiary, MERS is the beneficiary under Oregon Law. Another line of cases holds that while MERS is named as the beneficiary, the benefit of the deed of trust actually goes to the lender. The Court, however, does not address this issue because MERS was both named as the beneficiary and designated as the person receiving the benefit of the deed of trust.
Under Oregon Law, the purpose of a deed of trust is to secure performance of an obligation owed to the beneficiary, so the benefit of a deed of trust is that the obligation is fulfilled. Here, the deed of trust secured payment of the note, making the benefit of the deed of trust payment of the note. Under Oregon Law, the “beneficiary” is the person for whose benefit the deed of trust is given. Therefore, the beneficiary of the deed of trust is the person who has the right to payment of the note. Borrower argued that the obligation (payment of the note) was owed to the lender, not MERS, and therefore, the lender was the proper beneficiary.
The Court disagreed, however, because the deed of trust expressly named MERS as the beneficiary, and the Court concluded that MERS was entitled to receive payment of the note, thereby making MERS a proper beneficiary. In essence, the deed of trust granted MERS the right to exercise all rights and interests of the lender “if necessary to comply with law or custom.” This includes the right to receive payment of the note. The deed of trust repeatedly referred to MERS as the beneficiary, and this would not comply with Oregon Law unless MERS had the right to receive payment of the note. Therefore, the Court rejected Borrower’s arguments and dismissed this claim because MERS was a proper beneficiary of the deed of trust.
The Court also noted that this holding is consistent with public policy because it makes no change to the Borrower’s rights or obligations. It only changes the party to whom those obligations are owed. Moreover, this conclusion best carries out the intent of the parties, who clearly intended for MERS to be the beneficiary.
Finally, Borrower argued defendants committed fraud by authorizing non-employees to execute transfer documents. The Court dismissed this claim because Borrower failed to put forth any reason why defendants could not authorize these parties to act as their agents in executing these transactions. The mere fact that the signatories were not “regular employees” is not enough to establish a claim for fraud.
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