February 22, 2013
Utah District Court Holds that Consent Is Not Required for Lender to Assign Interest to MERS and that the Note and Deed of Trust Are Still Valid After Securitization; Court Holds TILA Claims Are Time Barred
In Witt v. CIT Group/Consumer Finance Inc., No. 2:10 CV 440 TS, 2010 WL 4609368 (D. Utah Nov. 5, 2010), the United States District Court of Utah granted Defendants’ motion to dismiss Plaintiffs’ claims.
On September 30, 2002, Plaintiffs executed a promissory note and a deed of trust in conjunction with a transaction to borrow money to finance a house. The deed of trust assigned all of the lender’s beneficial rights, title, and interest to MERS. On October 30, 2007, the lender securitized the mortgage loan and sold it to another party. Plaintiffs defaulted under the terms of the note and deed of trust, and on April 7, 2008, MERS appointed a successor trustee. Thereafter, the trustee initiated foreclosure proceedings on Plaintiffs’ property.
Plaintiffs first allege that the assignment from the lender to MERS was invalid because Plaintiffs never consented to the assignment. However, the court found that Plaintiffs’ consent was not required because “under general contract law, the assignability of a contract is assumed unless the parties express a contrary intent by contract.” In the case at hand, the plaintiffs “have not pled nor brought forth any evidence to suggest that Plaintiffs contracted for a prohibition on the assignment of the Note and Deed of Trust.” The court went on to say that the deed of trust, in fact, expressly provides for assignment.
Next, the plaintiffs claimed that the deed of trust and note were no longer valid because Defendants “split” the note in the process of securitization. The court, however, looked to “well-settled precedent” that establishes that “transfer of the note carries with it the security, without any formal assignment or delivery, or even mention of the latter.”
Finally, the plaintiffs brought forth a claim based on the violations of the Truth in Lending Act (TILA). The court quickly dismissed this claim as time barred. Under TILA, an action must be brought “within one year from the date of the occurrence of the violation.” A TILA violation occurs when the credit transaction is “consummated and completed.” The credit transaction at issue between the parties was consummated on September 30, 2002, and the opportunity for the plaintiffs to bring a TILA claim expired on October 1, 2003. Thus, the court dismissed each of the plaintiffs’ claims.
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