Montana Supreme Court Says MERS Not Foreclosure Beneficiary Under Montana Act

Montana reverses the trial court’s summary judgment for MERS, discussing whether MERS meets the statute’s definition of beneficiary as a matter of law:

We find that the definition of “beneficiary” is clear and unambiguous. The section
lends itself to only one interpretation, namely that the beneficiary is “the person named . . . in
a trust indenture as the person for whose benefit a trust indenture is given or the person’s
successor in interest” (emphasis added). Section 71-1-303, MCA. The Lenders argue that
MERS received a “benefit” from the DOT even though MERS did not lend the money and
has no right to repayment. The alleged benefit is title to the property in the event of
foreclosure. However, the DOT was not given for the benefit of MERS but for the benefit of
the lender. MERS may ultimately obtain some benefit based on its relationship with the
Lenders but that benefit is not granted by the DOT. See Edwards v. MERS, 300 P.3d 43, 49
(Idaho 2013) (“The deed of trust was not given for the benefit of MERS or to secure an
obligation owing to MERS. It was given for the benefit of Lehman Brothers to secure the
obligation owing to it. Although MERS may obtain a benefit based upon its relationship
with Lehman Brothers, the deed of trust was not granted in order to provide MERS with that
benefit.”).

Arizona’s statute is similar in that it also specifies that a “beneficiary” under a deed of trust is defined as the person named in the trust deed and “for whose benefit the trust deed is given.”

The court also cited law from other jurisdictions as this was an issue of first impression for Montana.  MERS’ agency argument was not properly asserted at the trial court so that was part of the reason it was rejected by the appellate court but it also said:

With a more complete record, other courts have refused to recognize MERS’ agent
status on summary judgment. A New York Bankruptcy Court refused to grant MERS agent
status because its membership agreement with lenders contained no grant of authority to
MERS. In re Agard, 444 B.R. 231, 252 (Bankr. E.D.N.Y. 2011). That membership
agreement is notably absent from this record, even though a principal-agent relationship
requires consideration of all facts and circumstances between the parties. Dick Anderson
Constr., Inc., ¶ 22. The membership agreement could be dispositive in this case as actual
authority requires the principal’s manifestation of assent to the agent’s action. Restatement
(Third) of Agency § 3.01; § 28-10-201, MCA. The Supreme Court of Oregon also found that
MERS had not sufficiently established its agency theory because no evidence showed “who
ultimately holds the relevant interest in the notes and trust deeds, and whether that person
and each of its predecessors in interest conferred authority on MERS to act on their behalves
in the necessary respects.” Brandrup v. Recontrust, Co., 303 P.3d 301, 323 (Or. 2013). The
evidence is missing here as well; the DOT only states that “Borrower understands and
agrees” that MERS’ was a nominee of the lenders, not that the lenders themselves granted
MERS authority.

Pilgeram Montana SC MERS not a bene

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