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john gault's Blog

Who May Assign a Deed of Trust, even if MERS has Authority?
by john gault | 2013/06/15 |

This material touches on numerous topics, including agency, but its primary goal is

to identify the party who may assign a deed of trust, either himself  or who may empower

another, including MERS, to do so.  I also discuss my belief that a deed of trust does not

"follow a note", why not, and why a court may not find an 'equitable' assignment.  

john gault's Blog ::

Does supplying, but not signing, the deed of trust meet the expession of authority 
demanded by the statute of frauds?
  1) Is the authority to assign deeds of trust granted? (I say "not so fast!") 
What impact does the fact that the lender doesn't sign the deed of trust have on the 
authority?  The borrower may agree in the document, but the borrower is not the one
whose express authorization is required. The borrower may not convey any rights of
the true beneficiary to MERS or anyone else.
  
As a nominee or agent, IF the answer to No. 1 above is yes, MERS may have certain 
authority, that is IF  
  2) the choice of the word nominee over agent in the document means that as a
nominee, a third party, here MERS, could appropriately be authorized to act as an
agent by language in the deed of trust which conflicts with the "Nominee" designation.
Any document which is patently open to interpretation imo suffered from poor drafting. 
 Or did it?

The fact that the word "agent" was not chosen is imo no slight matter. A nominal party is generally one with limited, if any, authority - a person meant to stand in for another, devoid of any rights. It appears to me that MERS avoided the word agency for the liability which comes with it and for other reasons related to its ostensible appointment of MERS members  as officers of MERS. 

 
  3) Who may authorize the assignment of the dot?  The note transferor?  The note 
     transferee?
The answer to that question depends on whether or not a deed of trust "follows 
a note".  If it does, it's possible the current note owner could command an assignment
of the collateral instrument.  If not, the answer is the last transferor / owner of the Note. The 
UCC does not regulate real property collateral instruments. Even if it did, it's by far the only law bearing on real property collateral instruments. They are regulated, in part, 
by the Statute of Frauds, which calls for a writing in order to convey an interest in real 
property.  A deed of trust is an interest in real property: the deed of trust does not, 
cannot, "follow" a note. A RIGHT to an assignment of the collateral instrument may very well 
follow the note, but not the instrument nor its interest. Many claimants today want to rely on a very old case, Carpenter v Longan, for the proposition that a mortgage (a two party instrument) follows a note. The Carpenter court did not address the statute of frauds when making its decision.

Significantly, there is no jurisdiction for a court to find an 'equitable' assignment of the deed of trust in a contest between the guy who wants an assignment and the borrower. In the absence of the guy who may owe someone an assignment, the court has no jurisdiction to entertain the issue. That guy's rights may not be adjudicated in his absence; he must be a party to the action. The only appropriate forum for a contest regarding an assignment is one between the guy who wants  the assignment and the guy he claims owes him one, and even then imo, the court is limited to ordering a written assignment.  

By all accounts, it's an employee of the servicer (law firm for servicer or trust?) for the trust  
who is executing the assignment as a MERS' "officer". The servicer, if he represents anyone, 
represents the alleged current note holder, the guy for whom he's servicing, and here, the
guy who wants an assignment. Being a servicer does not make one the party with the right 
to command an assignment of interest, even for the party for whom he services. Importantly, 
a servicer does not represent the last owner of the note, the guy who sold the note to the 
trust or other current owner. As such, "MERS" isn't authorized to execute an assignment at the behest of the servicer  for the current note owner, nor may MERS do so at the direct urging of the current note owner. Further, if a note is in the possession of one who is not its owner, there should be no assignment to that person - another story for another day. 

 Any authorization  to assign the deed of trust must come  from the last note owner, who is the only party with authority himself to execute an assignment of the collateral instrument to the party to whom it transferred the note.  Because a current note holder who does not himself have an assignment  may not himself execute an assignment of the collateral instrument , he cannot authorize another to do so, agent or otherwise. 

The assignments which have taken place historically, and to date as far as I know, are done
by an "officer" of MERS as nominee for the "original lender, its successors and or assigns"
There is never any e v i d e n c e that MERS has any relationship with any note owners subsequent
to the original lender named in the instruments,  nor the terms and extent of that relationship. 
There is never any evidence that MERS is the nominee or agent or has any relationship whatsoever 
with either the  "middle-men" or the last note owner.
 
But let's say for the moment there is such evidence of MERS' status with the last note owner,
the guy who may tell MERS to execute an assignment to the current note owner,  
distinguishable from the party in possession.  In order for a nominee or agent to convey its
principal's interest, the nominal or agency status must 1) exist and 2) be identified.  There
must be notice of the nominal or agency relationship, whatever is being relied on.   Even were there such evidence, an agent does not convey interest in its own right, as is the current posture of assignments. An agent conveys its principal's interest by just that - agency.  Every assignment must be executed by  "MERS", or whomever, as agent for an identified party. There is no good reason to recite what is currently written therein.  

 Imo, the  first paragraph should read, essentially, "ABC Lender assigns this deed of trust to XYZ Lender etc."  

Any document or instrument executed by one party for another, particularly when it comes to real property,  must say so. The appropriate language for the execution is like this:

ABC Lender
_____________________________
by MERS (or anyone), its authorized agent 

 If I leave town and give you my Power of Attorney to sign closing papers for the sale of my home, including the deed, you wouldn't sign your own name, would you? No, you'd sign like this:

John Gault, Grantor
_________________________________
by James Jabberwocky,  his attorney in fact (or "under a limited power of attorney", say) 

 Significantly, you would identify the party for whom you are signing.  If not, the deed would convey nothing. 

Imo, the current language in the assignment is no more than posturing, a red herring, one meant to distract from f a c t s. 
It's a reference to and in support of the "successors and or assigns" in the deed of trust, as if
that makes everything kosher and vitiates what is necessary for one to act for another, not only
as to evidence of authority, but in the very execution of that authority.  
As to the "successors and or assigns" recited in the deed of trust in regard to MERS' nominal
status, that language alone simply fails to support a relationship with any successors or assigns
of the lender, if for no other reason than the borrower alone signs the deed of trust, and just 
as he may not bestow the original beneficiary's rights on anyone, he surely may not bind 
subsequent parties.  Subsequent parties could be bound by other agreements; the players
remain free to assert such agreements between MERS and anyone who has had an interest in the 
deed of trust from its inception. Absent demonstration of all required agreements
as to MERS' status as nominee or other with subsequent interested parties, courts shouldn't be
finding any. These relationships are certainly not a fact in evidence.  
Let's say MERS is the agent of the original lender empowered to execute assignments, not merely abandon its nominal status. Let's even say MERS is the agent for the last note owner and it's time to execute an assignment.
Since MERS has no employees (it may now), who is going to execute the assignment? Well, the last (not current) note owner certainly could, assuming he were appropriately assigned the deed of trust  himself. But he doesn't want to, so let's say he has an appropriate agreement with MERS, one which passes muster including with the statute of frauds. In that agreement, the last note owner authorizes MERS to execute an assignment on his behalf to the current note owner.
Because MERS has no employees, and for other reasons unknown, MERS allegedly "officer-izes 
employees of servicer-members (and by some accounts, employees of non-members) to
execute these assignments on MERS' behalf. 
 No. 4) Is this legitimate a) at all and b) is it legitimate if the member-employee to execute the
assignment in MERS' name is an employee of the servicer for the current note holder, i.e., 
the servicer's boss or principal, who is the transferEE? I've already weighed in in previous 
blogs on my impression of an alleged agent making its principal ITS agent (officer?) 
(tweaked, very tweaked), so just now I'll concentrate on the person executing the assignment 
having a relationship with the transferEE.
I call this a patent conflict of interest: MERS, or anyone, should not be authorizing a person
connected with, or the agent of, the assignment transferEE to make the assignment in MERS'
name. Not only should this not be allowed, it should be prohibited. If anyone (and again
my impressions of this m.o. are well-known to long-time readers), MERS should only allow
assignments in its name to be done by a person properly associated with the transferOR or at any rate, certainly not someone affiliated with the transferEE.  And even then, MERS relationship with the transferor must be identified and the assignment executed accordingly, above. 
This is all the more true because in reality, it's likely the transferEE who is pulling the strings.  

As I've said before, we all understand that obligations have to be taken seriously. But that is a two- way street.  These are as always lay opinions.

 



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An agent may NOT assign its principal's interest; I sit corrected

Well, a deserved and rather tardy 'duh' on me.  An agent may not alienate the interest of its principal.

 Only an attorney in fact may. This, of course, means that my description in this blog about how an agent must sign an assignment, say, is errant as heck. That description would only be applicable to an attorney in fact. 

 
by john gault | 2015/03/02 | log in or register to post a reply

Ratification, MERS and the statute of frauds
Anyway you look at it and argue it - and you may well be correct - a court will say it was voidable because it could be ratified (express or implied by silence). That's agency law for you.

But in some MERS assignments they didn't even take the trouble to mention lender ABC, just assigned interest in MERS make alone. That represents non compliance with the statute of frauds rendering the the contract not void but unenforceable.

Well...actually non-compliance with the statute of frauds can be cured but only if it is done within the statute of frauds
 
by Carl Forbes | 2016/08/13 | log in or register to post a reply

Ratification, MERS and the statute of frauds
Anyway you look at it and argue it - and you may well be correct - a court will say it was voidable because it could be ratified (express or implied by silence). That's agency law for you.

But in some MERS assignments they didn't even take the trouble to mention lender ABC, just assigned interest in MERS name alone. That represents non compliance with the statute of frauds rendering the the contract not void but unenforceable.

Well...actually non-compliance with the statute of frauds can be cured but only if it is done within the statute of frauds
 
by Carl Forbes | 2016/08/13 | log in or register to post a reply
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