Burgett v. MERS, et al

8/7/2019 Burgett v. MERS, et al

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FrLED '10 OCT 20 1.1;(10 USDC'ORE

IN THE UNITED STATES DISTRICT COURT FOR THE DISTRICT OF OREGON

EUGENE DIVISION

ELMER L. BURGETT, CASE NO. 09-6244-HOP l a i n t i f f , ORDER

vs.MORTGAGE ELECTRONIC REGISTRATIONSYSTEMS, INC. a Delaware corporat ion ,e t a l . ,

Defendants .

P la in t i f f Elmer Burge t t , br ings t h i s ac t ion al leg ing "predatoryl ending" with r espec t to the ref inancing of h is home mortgage.P l a i n t i f f a l l eges Truth in Lending Act (TILA) vio la t ions , v io la t ion ofthe Oregon Mortgage Broker Act , breach of con t rac t , and vio la t ion ofthe Real Es ta te Set t lement Procedures Act (RESPA).

Defendants Aurora Loan Services , LLC and Mortgage Elec t ron ic

ORDER - page 1

Case 6:09-cv-06244-HO Document 63 Filed 10/20/10 Page 1 of 7 Page ID#: 357


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Regis t r a t ion Systems, Inc . (MERS) seek summary judgment as to claimsaga ins t them.

P l a i n t i f f ente red in to a loan agreement in or about March of 2007,to re f inance h is home mo-rtgage. MERS i s l i s t e d on the Deed of Trus t asthe benef i c i a ry . Aurora began se rv ic ing th e Loan in Apr i l of 2008.On Apr i l 28, 2009, MERS executed an ins t rument en t i t l ed Subs t i tu t ion ofTrustee under which defendant Cal-Western Reconveyance Corporat ion wasappointed as t ru s t ee under the Deed of Trus t . The s ubs t i t u t i on ofTrus tee was recorded on Apr i l 29, 2009, in Marion County.

On Apr i l 28, 2009, Cal-Western Reconveyance executed a note ofdefau l t and e lec t ion to s e l l , and t r u s t e e ' s no t ice of sa le fo rSeptember 3, 2009 which was also recorded on Apr i l 29, 2009.

P l a i n t i f f i n s t i t u t e d t h i s act ion on September 9, 2009. Aforeclosure sa le has not occur red .

Defendants contend t h a t p l a i n t i f f ' s TILA claims are barred , t ha tthere has been no vio la t ion of RESPA, and t ha t p l a i n t i f f ' s dec la ra to ryr e l i e f and breach of con t rac t claims should be dismissed because MERSand Cal-Western Conveyance had the au thor i ty to commence and prosecutea nonjudic ia l foreclosure act ion .

TILAP l a i n t i f f withdraws h is TILA resc i s s ion claim and the claim fo r

damages r e l a t i ng to a fa i lu re to honor resc i s s ion . The claims aredismissed .

ORDER - page 2



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lh. RESPAPl a i n t i f f as se r t s tha t defendants fa i led to proper ly respond to

h i s wr i t t en inqui re s regarding h is loan in v io la t ion of RESPA. Amongo the r reasons, defendants contend t h a t the RESPA claim f a i l s becausethe a l leged breach r esu l ted in no ac tua l damage to p l a i n t i f f .

Fai lure to comply with RESPA r e su l t s in l i a b i l i t y for "ac tua ldamages as a r e s u l t of the f a i lu re ... and any addi t iona l damages, asthe cour t may al low, in the case of a pat te rn or prac t i ce ofnoncompliance in an amount not to exceed $1,000." 12 U.S.C. 2605(f ) (1) . At ora l argument , p l a i n t i f f conceded t he re a re nopecuniary damages incur red as r e s u l t of the a l leged vio la t ion and t ha the i s only seeking s ta tu to ry damages. Accordingly, summary judgment i sappropr ia te as the RESPA claim. See Hutchinson v. Delaware Sav. BankFSB, 410 F.Supp.2d 374, 383 (D.N.J. 2006) ("a l leg ing a breach of RESPAdut i e s alone does not s t a t e a claim under RESPA. P l a i n t i f f s must , a t aminimum, a l so a l l ege t ha t the breach r esu l ted i n ac tua l damages .... See12 U.S.C. 2605 (f) (1) (A) ("Whoever f a i l s to comply with t h i s sec t ionsha l l be l i ab l e to the borrower ... [ for] any ac tua l damages to theborrower as a r e su l t of the f a i l u r e . " ) ; Cortez v. Keystone Bank, No.98-2457, 2000 WL 536666, *12, 2000 u.S. Dist . LEXIS 5705 a t *40(E.D.Pa. May 2, 2000) (a c la imant under 12 U.S.C. 2605 must a l l ege apecuniary l os s a t t r ibu tab le to the a l leged v io la t ion ) " ) .

ORDER - page 3

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Declara tory Rel ie f and Breach of Cont rac tP l a i n t i f f contends t ha t under the Oregon Trus t Deed Act, MERS and

Cal-Western may not foreclose on h is proper ty because MERS i s no t a"benef ic iary" under the Act.

The deed of t r u s t a t i ssue spec i f i ca l l y s t a t e s :"MERS" i s a separate corpora t ion t ha t i s ac t ing so le ly as anominee fo r Lender and Lender ' s successors and as s igns . MERSi s the benef ic iary under t h i s Secur i ty Inst rument .

Deed of Trus t at tached to the Declara t ion of Chris Zimmerman (#37) asexh ib i t D a t p. 2.

Defendants c i t e a law review a r t i c l e to expla in the prac t iceengaged in with r espec t to the loan:

In 1993, the Mortgage Bankers Assoc ia t ion , Fannie Mae,Freddie Mac, the Government Nat iona l Mortgage Assoc ia t ion(Ginnie Mae), the Federa l Housing Adminis t ra t ion , and theDepartment of Veterans Affa i r s created MERS. MERS provides' e l e c t ron i c process ing and t racking of [mortgage] ownershipand t r a n s f e r s . ' Mortgage lenders , banks, insurance companies,and title companies become members of MERS and pay an annualfee . They appoint MERS as t h e i r agent t o ac t on a l l mortgagest ha t they r eg i s t e r on the system. A MERS mortgage i s recordedwi th the par t i cu l a r county 's of f ice of the recorde r with'Mortgage Elec t ron ic Reg is t r a t ion System, I n c . ' named as thel e nde r ' s nominee or mortgagee of record ' on the mortgage. TheMERS member who owns the benef ic ia l i n t e r e s t may ass ign thosebenef ic ia l ownership r i gh t s or se rv ic ing r i gh t s to anotherMERS member. These ass ignments are not pa r t of the publ icrecord , bu t are t racked e l e c t ron ic a l ly on MERS' s pr iva terecords . Mortgagors are no t i f i e d of t r a ns f e r s of serv ic ingr i gh t s , but not of t r a ns f e r s of benef ic ia l ownership.

Gerald Korngold, LEGAL AND POLICY CHOICES IN THE AFTERMATH OF THESUBPRIME AND MORTGAGE FINANCING CRISIS, 60 S.C. L.Rev. 727, 741-42(2009). P l a i n t i f f t akes i s sue with t h i s prac t ice and concludes it i snot permi t ted under Oregon t r u s t deed law because it al lows assignmentORDER - page 4



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of b e n e f i c i a l i n t e re s t s withou t record ing . Such an argument does notn eces s a r i l y mean t h a t th e arrangement v i o l a t e s the Oregon Trust DeedAct such t ha t fo rec losure proceed ings could not be i n i t i a t e d by MERS o ri t s s ubs t i t u t e t rus t e e . 1

Under ORS 86.705 (1 ) a '" Benef i c i a ry ' means th e person named o rotherwise des igna ted in a t r u s t deed as th e person fo r whose b en e f i t at r u s t deed i s given, or the person ' s su ccesso r in i n t e r e s t , and whosh a l l not be th e t r u s t e e unless the benef ic ia ry i s q u a l i f i e d to be at r u s t e e under ORS 86.790 (1 ) (d ) . " P l a i n t i f f contends t h a t MERS cannotmeet t h i s d e f i n i t i o n because the re i s no evidence t h a t th e t r u s t deedwas made t o b en e f i t MERS. However, th e t r u s t deed s pe c i f i c a l l ydes igna tes MERS as th e benef ic ia ry . Judge Henry C. Brei thaup t providesa persuas ive d i scuss ion r e l a t e d to . t h i s i s sue :

[TJhe i n t e r e s t o f MERS, and those fo r whom it was a nominee,in ques t ion here was recorded and known to P l a i n t i f f when itrece ived th e l i t i g a t i o n guarantee document pr io r to s t a r t i ngt h i s ac t ion .The S ta tu t e s do no t proh ib i t l i ens to be recorded in th edeed of records o f count ies under an agreement where an agen tw i l l appear as a l i enho lder fo r th e b e n e f i t of the i n i t i a ll ende r and subsequent ass i g n ees of t h a t l ender -even where th eass ignments of the b e n e f i c i a l i n t e r e s t in th e record l i e n arenot recorded . I t i s c l e a r t h a t such unrecorded ass ignmentso f r i g h t s are permiss ib le under Oregon 's t r u s t deed s t a t u t e

lBut see, In re Allman, 2010 WL 3366405, at *10 (Bankr. D. Or. Aug. 24, 2010). There,the court considered the meaning of "beneficiary" under Oregon's trust deed statute as "theperson named or otherwise designated in a trust deed as the person for whose benefit the trustdeed is given . . . ." ORS 86.705(1). The court then concluded, after examining language of thetrust deed that is similar to the language contained in the deed of trust in this case, that MERSwas not "in any real sense ofthe word, particularly as defmed in ORS 86.705(1), the beneficiaryof the trust deed." Id.

ORDER - page 5



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because ORS 86.735 provides if forec losure by sa le i s pursueda l l p r i o r unrecorded ass ignments must be f i l ed in connect ionwi th the fo rec losure . Th e t r u s t deed s t a t u t e s t h e r e f o r ec l e a r ly contemplate t h a t ass ignments of the b e n e f i c i a li n t e r e s t s in ob l iga t ions and se c u r i t y r i g h t s w i l l occur andmay, in f a c t , not have been recorded pr io r to fo rec losure .Th e l e g i s l a tu r e was c l e a r ly aware such ass ignments occurredand nowhere provided t h a t ass ignments needed to be recordedto maintain r i g h t s under th e l i e n s t a tu t e s except wherefo rec losure by sa le was pursued.Le t t e r Decis ion in Parkin El e c t r i c , Inc . v. Saf tencu , No.

LV08040727, dated March 12, 2009 (a t tached as Exhib i t C to the secondd ec l a r a t i o n of David Weibel (#60)) .

Th e problem t ha t defendants run in to in t h i s case i s an apparentf a i l u r e to record ass ignments necessary for the fo rec losure . As JudgeBrei thaupt notes , ORS 86.735 provides t ha t if fo rec losure by sa le i spursued, a l l p r i o r unrecorded ass ignments must be f i l ed in connect ionwith the fo rec losure . ORS 86.735(1) s pe c i f i c a l l y prov ides

Th e t r u s t e e may fo rec lose a t r u s t deed by adver t i sement andsa le in th e manner provided in ORS 86.740 to 86.755 i f :(1) The t r u s t deed, any ass ignments of the t r u s t deed by the t r u s t e e o r the benef ic ia ry and any appointment o f a successor t r u s t e e a re recorded in th e mortgage records in the count ies in which the proper ty descr ibed in the deed i s s i t ua t e d ...

Defendants cla im t ha t only th e s ubs t i t u t i on of Cal-Western as t r u s t e e need be recorded under ORS 86.790 (benef ic ia ry may appo in t in wri t ing ano ther q u a l i f i e d t r u s t e e ) . However, t he fo rec losure s t a t u t e s pe c i f i c a l l y contemplates "any ass ignments of the t r u s t deed by the t r u s t e e or the benef ic iary and any appointment of a su ccesso r t r u s t e e "must be recorded. Here, th e subsequent l enders / se rv ice rs are alsob e n e f i c i a r i e s as holders of the b e n e f i c i a l i n t e r e s t as th e p r i n c i p a l ofORDER - page 6



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MERS who ac t s as th e l e nde r ' s agent under the t r u s t deed. The recordhere does not demonstra te t ha t a l l the t r ans fe r s have been recorded. 2Accordingly, summary judgment i s denied with r espec t to declara toryr e l i e f and breach of con t rac t .

CONCLUSIONFor the reasons s ta ted above, the motion fo r summary judgment

f i l ed by defendants Aurora Loan Services , LLC and Mortgage Elec t ron icRegis t ra t ion Systems, Inc . (#35) i s granted in p a r t and denied par t .

DATED t h i s day of October, 2010.

.e.

2Plaintiff asserts several transfers of beneficial rights have occurred including transferfrom First Magnus Financial Corp. to Residential Funding Company, LLC on or about March 27,2007; transfer from Residential Funding Company to RFC Trustee 02 on or about May 4,2007;and transfer from RFC Trustee 02 to Deutsche Bank National Trust Company Qn or about May 5,2008. Defendant fails to demonstrate proper recoding of these and other transfers, if any.

ORDER - page 7


Burgett v. MERS, et al

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