From: Charles Cox [mailto:email@example.com]
Sent: Thursday, March 01, 2012 10:29 AM
To: Charles Cox
Subject: David Ambrose on James v. Recontrust
Attached is the opinion which came down today of US District Court Judge Michael H. Simon. This is a significant opinion, and one which will likely have a substantial impact on not only pending nonjudicial foreclosures in Oregon, but those which have already occurred, involving MERS as the nominee for the lender on the trust deed. Of most import, the ruling holds:
1. Only the note holder may be a beneficiary under a trust deed under Oregon law;
2. Therefore, whether the parties have agreed to designate MERS as the beneficiary or not, is irrelevant, as Oregon law is controlling and paramount, and because MERS is not the note holder, MERS is not the beneficiary. While this opinion is of course specific to Oregon’s laws, it does persuasively dispel the argument that because the parties designated MERS as the beneficiary, that should be controlling (and as an aside, like any home owner signing a trust deed with MERS as the designated nominee had any idea what that really meant?);
3. In non-legalese, the law and custom argument made by MERS (who at MERS law firm actually dreamed up this language?) is simply bogus. The opinion includes a fascinating, and somewhat humorous, discussion of this provision in a MERS trust deed and the circularity of the MERS argument on this point.
4. Under Oregon law, when the ownership of the note is transferred, there is a corresponding transfer of the beneficiary’s interest under the trust deed, and under Oregon law, all such transfers must be recorded in order for the remedy of nonjudicial foreclosure to be available. Absent such recorded assignments, there can be a judicial foreclosure, but not a nonjudicial foreclosure. And once you get into court, all of a sudden the "who owns the note" argument is no longer an irrelevant inquiry (standing, real party in interest, etc.).
Why the potential impact on completed nonjudicial foreclosures? Because if the trustee had no authority to conduct the sale, the sale is arguably void (not just voidable) (and there are already Oregon Circuit Court cases holding to this effect), and taking a cue from rulings in Massachusetts, and other states, this means that a buyer at a foreclosure sale, or a later buyer of the property from the foreclosing lender who acquired title at the foreclosure sale, may be set aside, and the bona fide purchaser doctrine will be unavailable. I imagine our title insurers are going to be having heart palpitations about this one.