Brandrup v. ReconTrust Co. – MERS Ruling in Oregon Part 1
By Daniel Edstrom
DTC Systems, Inc.
The Oregon Supreme Court was asked four questions, and answered as follows:
We accepted the district court’s certification and allowed the parties in the federal cases to
present their views. We answer those questions — in two instances as reframed — as
(1) “No.” For purposes of ORS 86.735(1), the “beneficiary” is the lender to whom the obligation that the trust deed secures is owed or the lender’s successor in interest. Thus, an entity like MERS, which is not a lender, may not be a trust deed’s “beneficiary,” unless it is a lender’s successor in interest.
(2) We reframe the second question as follows:
Is MERS eligible to serve as beneficiary under the Oregon Trust DeedAct where the trust deed provides that MERS “holds only legal title to the interests granted by Borrower in this Security Instrument, but, if necessary to comply with law or custom, MERS as nominee for Lender and Lender’s successors and assigns) has the right: to exercise any or all of those interests”?
Answer: “No.” A “beneficiary” for purposes of the OTDA is the
person to whom the obligation that the trust deed secures is owed. At the time of origination, that person is the lender. The trust deeds in these cases designate the lender as the beneficiary, when they provide:
“This Security Instrument secures to Lender: (i) the repayment of the loan, and all renewals, extensions and modifications of the note; and (ii) the performance of borrower’s covenants and agreements under this security instrument and the note.” Because the provision that MERS “holds only legal title to the interests granted by Borrower in this Security Instrument, but, if necessary to comply with law or custom, MERS * * * has the right to exercise any or all of those interests,” does not convey to MERS the beneficial right to repayment, the inclusion of that provision does not alter the trust deed’s designation of the lender as the “beneficiary” or make MERS eligible to serve in that capacity.
(3) “No.” ORS 86.735(1) does not require recordation of “assignments” of a trust deed by operation of law that result from the transfer of the secured obligation.
(4) We answer the question, as reframed below, in two parts:
(4)(a) “Does the Oregon Trust Deed Act allow MERS to hold and transfer legal title to a trust deed as nominee for the lender, after the note secured by the trust deed is transferred from the lender to a successor or series of successors?”
Answer: “No.” For purposes of the OTDA, the only pertinent interests in the trust deed are the beneficial interest of the beneficiary and the legal interest of the trustee. MERS holds neither of those interests in these cases, and, therefore, it cannot hold or transfer legal title to the trust deed. For purposes of our answer to the first part of the fourth certified question, it is
immaterial whether the note secured by the trust deed has previously been “transferred from the lender to a successor or series of successors.”
(4)(b) “Does MERS nevertheless have authority as an agent for the original lender and its successors in interest to act on their behalves with respect to the transfer of the beneficial interest in the trust deed or the nonjudicial foreclosure process?”
Answer: The power to transfer the beneficial interest in a trust deed or to foreclose it follows the beneficial interest in the trust deed. The beneficiary or its successor in interest holds those rights. MERS’s authority, if any, to perform any act in the foreclosure process therefore must derive from the
original beneficiary and its successors in interest. We are unable to determine the existence, scope, or extent of any such authority on the record before us.