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Recent Utah Court Decisions re MERS

by Tom Cook
Lundberg & Associates – USFN Member (UT)

Three recent court cases in Utah regarding MERS have resulted in contradictory decisions and are worthy of lender and servicer attention.
First case: A case in state court, successfully removed to federal court (Case No. 1:10-cv-00033-CW), was brought by the trustor against MERS, the original lender, the foreclosure trustee, the junior lienholder, and the investor. After the case was removed, a motion for summary judgment was filed. The court decision signed October 19, 2010 held that: (1) securitization of the note did not strip the holder of authority to appoint a trustee and foreclose; (2) the plaintiff failed to meet the requirements of his equitable estoppel cause of action; (3) the Uniform Commercial Code arguments did not succeed where there is a distinct nonjudicial foreclosure statute; (4) MERS has the right “to act on behalf of those parties who have the ultimate right to collect the debt”; (5) MERS has standing as a proper party to the action; and (6) the trustor’s claim of quiet title alleging that no trust deed lien remained attached to the property was insufficient; and, all causes of action against the first position trust deed were dismissed with prejudice.

Second case: A December 16, 2010 decision in a case in Utah’s 4th District Court (a lower state court) reached virtually the identical decision on mostly the same arguments by the trustor. (Case No. 100403141; no further citation is available for a Utah lower court decision). The following statements from the decision define the court’s opinion of this type of action against MERS: “The court concludes that MERS has standing to serve as beneficiary and to appoint a successor trustee. The court further concludes that the plaintiffs (trustor) consented to MERS as beneficiary with the power to foreclose on the plaintiffs’ property.”
The significance of the cases discussed above is that the court recognized the authority and standing of MERS and, in the first case, struck down an attempt to quiet title. The following case has the opposite result.

Third case: A case for quiet title was filed to clear title to a property with a recorded trust deed that named MERS as the beneficiary. The trustor purposely kept the loan current during the pendency of the litigation to avoid any unwanted documents, such as a substitution of trustee or notice of default, being recorded with the county recorder. The lawsuit named and served only the original lender and the original trustee on two recorded trust deeds. MERS, as the original beneficiary, was intentionally omitted as a party defendant. The attorney also had the ability to determine the entity to which the trustor was making payment and failed to name that party.

All served parties failed to answer or disavowed any ongoing interest in the property. The court entered default judgment and quieted title to the property in the plaintiff without ever having a hearing or questioning the list of defendants. The trustor sold the property clear of the trust deeds and thereafter stopped making payments. The extinguished senior trust deed has now been referred for foreclosure. The question is: what is left to foreclose? It appears that this action may result in protracted and costly litigation.

The attorney in this third case allegedly claims the same result in two other cases. Moreover, another attorney has apparently jumped on the band wagon, contending the same success in a similar case. Both purport to have a number of these cases pending and are obtaining many new clients for the same action. An article was published in the Salt Lake Tribune about these actions and MERS on January 15, 2011, and updated the next day. The newspaper’s website is accessible here; find the referenced article by using the search term “MERS.”

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