Oregon Appellate Court Says MERS Does Not Meet Statutory Definition of “Beneficiary”

In Niday v. GMAC Mortgage, LLC, No. A147430 (Or. Ct. App. July 18, 2012 ),Oregon’s appellate court has determined that MERS does not meet the definition of “beneficiary” as set forth in Oregon’s non-judicial foreclosure statute. This is consistent with some of the Oregon federal district court cases where the issue was thoroughly analyzed, such as James v. Recontrust, ___F. Supp.2d___, 2012 US Dist LEXIS 26072 (D. Or. Feb. 29, 2012).

Oregon’s statutory definition of “beneficiary” is almost IDENTICAL to Arizona’s definition:

“As used in ORS 86.705 to 86.795, unless the context requires
otherwise:
“(1) ‘Beneficiary’ means the person named or otherwise designated
in a trust deed as the person for whose benefit a trust deed is given, or the
person’s successor in interest, and who shall not be the trustee unless the
beneficiary is qualified to be a trustee under ORS 86.790(1)(d).”

ARIZONA REVISED STATUTE 33-801Definitions

In this chapter, unless the context otherwise requires:

1. “Beneficiary” means the person named or otherwise designated in a trust deed as the person for whose benefit a trust deed is given, or the person’s successor in interest.

The Oregon Court of Appeals analyzed as follows:

As noted above, the trust deed in this case stated, “MERS is the beneficiary
under this Security Instrument.” According to defendants, that is the end of the debate.
MERS, under the plain language of the trust deed, is the person named and designated in
the trust deed as the beneficiary, and nothing in the OTDA expressly prohibits the parties
from contractually agreeing to designate MERS in that way. In other words, absent some
express prohibition on this type of arrangement, the person “for whose benefit a trust
deed is given” is whoever the trust deed says it is.

We are not persuaded that the legislature intended circularity and
redundancy in defining beneficiary. The legislature could have simply defined
“beneficiary” as the person named or otherwise designated in a trust deed as the
beneficiary. Instead, the legislature used the phrase “the person for whose benefit a trust
deed is given[.]” We presume that the legislature used that different language for a
reason. State v. Cloutier, 351 Or 68, 98, 261 P3d 1234 (2011) (although redundancy may
sometimes be what the legislature intended, such an interpretation “should give us
pause”; courts generally strive to “give effect to all” of the parts of a statute (citing ORS
174.010)). That is, we presume that the legislature intended the phrase “person for whose
benefit a trust deed is given” to add some content to the definition of beneficiary.

Considering the statutory and historical context of the OTDA, we are
persuaded, further, that the legislature understood the “person for whose benefit a trust
deed is given” to refer to a particular person–namely, the person to whom the underlying, secured obligation is owed.

Nothing in the text, context, or legislative history of the OTDA suggests
that the legislature intended the “person for whose benefit a trust deed is given” to refer to
anyone other than the party to whom the secured obligation was originally owed. ORS
20 86.705(1). And, as a matter of historical context, defendants’ construction of the statute
is not consistent with how security instruments in the nature of mortgages functioned.

By the time the OTDA was enacted in 1959, it was well established that the mortgage was

merely an incident to the underlying debt. See Beauchamp v. Jordan, 176 Or 320, 327,

157 P2d 504 (1945) (“They were merely an incident to the debts evidenced by the above3
mentioned notes and the transfer of the notes effected a transfer of these mortgages.”
(Citations omitted; emphasis added.)); Rutherford v. Eyre & Co., 174 Or 162, 172, 148
P2d 530 (1944) (“[S]ome point is sought to be made by the plaintiffs of the fact that the
collateral agreements were not formally assigned to Eyre and Co. But this, of course,
was not essential; the mortgages were but incidents to the notes, and endorsement and
delivery of the notes carried the mortgages with them * * * and necessarily, also, the
collateral agreements, as an integral part of those instruments.”); Schleef v. Purdy et al.,
107 Or 71, 78, 214 P 137 (1923) (“Until foreclosure and sale the mortgage is a mere
chose in action secured by a lien upon the land, which gives to the mortgagor no title or
estate whatever to the mortgaged premises. The mortgagor has no interest in the
mortgaged premises which he can sell or which can be sold separately from the debt
itself, and the transfer of the mortgage, without a transfer of the debt intended to be
secured thereby, is a mere nullity. * * * A mortgage given as security for the payment of
a note may be transferred either by the indorsement of the note and the surrender of its
possession or, if the note is payable to bearer, by the mere delivery thereof and the
surrender of its possession, and this transfer of the note, without any formal transfer of
the mortgage, transfers the mortgage[.]” (Emphasis added.)). In other words, the
underlying debt and the security for that debt were not separately transferrable; the party
who benefitted from the mortgage and the party to whom the obligation was owed were
one and the same.

. . .

Defendants have conflated two issues: (1) who is the “beneficiary” under
20 ORS 86.705(1); and (2) who can act on behalf of that beneficiary. The former is the
21 statutory construction question before us, and, in our view, neither agency nor nominee
22 law provides relevant context as to that question, let alone context that demands a

Despite referring to MERS as the beneficiary, the trust deed designates
GreenPoint as the party to whom plaintiff, the borrower, owes the obligation secured by the trust deed. The trust deed explicitly “secures to Lender: (i) the repayment of the Loan* * * and (ii) the performance of Borrower’s covenants and agreements * * *.” For the reasons discussed above, GreenPoint, the lender, is therefore the “beneficiary” of the trustdeed within the meaning of ORS 86.705(1), whereas MERS is designated as an agent or nominee of GreenPoint. Consequently, we conclude that the trial court erred in granting summary judgment in favor of defendants in this case.

In sum, we conclude that the “beneficiary” of a trust deed for purposes of the OTDA is the person named or otherwise designated in the trust deed as the person to
whom the secured obligation is owed–in this case, the original lender. We further conclude that, because there is evidence that the beneficiary assigned its interest in the trust deed without recording that assignment, there is a genuine issue of material fact on this summary judgment record as to whether ORS 86.735(1), a predicate to non-judicial foreclosure, has been satisfied. We emphasize, however, that our holding concerns only the requirements for nonjudicial foreclosure. Cf. ORS 86.710 (beneficiary of the trust deed retains the option of judicial foreclosure). And the import of our holding is this: A
beneficiary that uses MERS to avoid publicly recording assignments of a trust deed cannot avail itself of a nonjudicial foreclosure process that requires that very thing–publicly recorded assignments.
Reversed and remanded.

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