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Mortgage Lawsuits News | Mortgage Litigation Index
Mortgage industry lawsuit news and mortgage litigation coverage. Stories about legal settlements, judgments and mortgage class actions.
MERS, Equitable Subrogation Dominate Title Litigation
Recent activity in lawsuits tied to loan titles
May 29, 2012
By SAM GARCIA Mortgage Daily
The Mortgage Electronic Registration Systems Inc. has been on a role -- with the MERS model recently upheld by courts in several states. Idaho, New York and Oregon saw much of the favorable MERS activity. Meanwhile, lenders jockeying in court for lien position are frequently subjected to the doctrine of equitable subrogation.
On May 22, the New York State Supreme Court, Appellate Division, upheld MERS' role as nominee and unanimously affirmed a trial court decision granting Bank of New York's motion for summary judgment on its foreclosure complaint against Eddie Sachar, MERS said. The court agreed with the lower court that there was no merit to a claim that MERS, as a nominee of the original lender, did not have the authority to assign the mortgage to Bank of New York.
A day earlier, MERS announced that the Appellate Division, Second Judicial Department, reversed a dismissal in Deutsche Bank v. Rivas, while the New York Supreme Court in Hudson City Savings Bank v. Lanoue did the same. The two decisions clarify questions regarding a foreclosing lender's standing to commence a foreclosure action in the state.
A decision last year by a U.S. Bankruptcy Court in New York that MERS' status as nominee for the lender and the rights conferred on MERS through the mortgage itself were insufficient to "empower MERS to effectuate a valid assignment of mortgage" was vacated on March 28 by the U.S. District Court for the Eastern District of New York. The judge found that "this portion of the Stay Order constitutes an unconstitutional advisory opinion and must be vacated."
MERS announced this month that a three-judge panel of the U.S. Court of Appeals for the 11th Circuit affirmed a 2011 decision by a U.S. District Court judge dismissing an attack on the validity of a Florida foreclosure judgment. Ignacio Damian Figueroa's attempt to receive damages through a Racketeering Influenced and Corrupt Organizations complaint against MERS and others was thwarted, with the panel noted that the "state-court loser" raised many of the same fraud claims that were raised in his state court trial.
In MB Financial Bank, N.A., et al., v. Paragon Mortgage Holding LLC, the District Court of Appeal of Florida, Second District, determined on March 21 that the trial court erred in determining the senior indebtedness had been satisfied by virtue of its transfer from one owner to another. The complicated commercial transaction involved a $4.8 million loan originated by Broadway Bank and sold to two of the guarantors of the loan.
The California Court of Appeal, Fourth Appellate District, confirmed on May 17 that MERS has the power, as nominee beneficiary, to assign its interest under a deed of trust, Ballard Spahr LLP reported. The court affirmed the trial court's dismissal of the case, which attempted to set aside the Federal National Mortgage Association's acquisition of the property at a non-judicial foreclosure sale -- claiming that MERS lacked authority to assign the note and deed of trust since it didn't have an agency agreement with the original lender or the Federal Deposit Insurance Corp., which inherited the loan through receivership.
In U.S. Bank National Association v. Salazar, the U.S. District Court for the Southern District of California reversed an April 2011 decision, MERS said. The judge found that the bankruptcy court erroneously interpreted Calif. Civ. Code § 2932.5 in ruling against U.S. Bank's motion for relief and determined that MERS' role as beneficiary and agent for the lender is valid.
MERS announced that the Texas Court of Appeals, Third District, affirmed on May 18 a trial court's dismissal of a wrongful foreclosure lawsuit against MERS, a news release stated. The judge found that MERS' assignment of the deed of trust was valid. The judge wrote, "Under Texas law, where, as here, a deed of trust expressly grants MERS the power of sale, then MERS has that power." The court also found no merit to the plaintiffs' claims of "bifurcation" of the promissory note and deed of trust.
In U.S. District Court for the Western District of Texas, Judge Sam Sparks cited established Texas law in ruling in Kramer v. Fannie Mae, et al, that a borrower cannot challenge a mortgage assignment to which he is not a party, MERS announced on May 18. The judge reportedly called the plaintiff's allegations "indignant" and noted that is was just a "case of a man who willingly entered into a mortgage, failed to make the required payments thereunder, and then, pursuant to the terms of his agreement, was forced to relinquish possession of the property for which he had not paid."
In Oregon, a U.S. District Court Judge affirmed MERS' role in a May 15 decision in Whitmore v. Recontrust Co. The judge found that Oregon Trust Deed Act does not require presentment of the promissory note to foreclose.
The Circuit Court of Oregon also ruled in favor of MERS on May 7, dismissing a complaint filed by Earl Jorgenson. The judge found no requirement to record trust deed assignments each time the underlying note is transferred.
On April 26, U.S. District Court Judge Michael Hogan found no merit to Daniel P. and Shaye Branson's allegations of wrongful foreclosure related to MERS' role as beneficiary under plaintiffs' deed of trust, according to MERS.
MERS said its role was also upheld in three other Oregon cases: Dye v. BAC Home Loans Servicing, Thompson v. The Bank of New York Mellon and Meza-Lopez v. Deutsche Bank National Trust Co.
MERS additionally touted recent victories in White v. Bank of America, Stolz v. OneWest Bank and Dumitrash v. Recontrust Company.
An order that determined a judgment in favor of contractor Michael Ricker against Stephen F. and Lisa K. Kessler takes priority over a judgment in favor of construction lender Metro Bank was upheld by the Superior Court of Pennsylvania on May 9. While the trial court based its decision on a law that was in effect when Ricker started construction, the Superior Court ruling was based on some of the proceeds from Metro Bank's loan going to pay expenses other than construction costs.
A summary judgment in favor of U.S. Bank, N.A., against John W. Alexander III was reversed and remanded for further proceedings on May 1 by the Supreme Court of Oklahoma. At issue was a missing indorsement on the loan that was originated by MILA Inc. in May 2005. But the borrowers are not exonerated by the debt owed, and a foreclosure can still be pursued with an authenticated note.
First Republic Mortgage Corp. refinanced a first and second mortgage on Ronnie D. and Debora J Brand's Indianapolis property in March 2007, and the loan was subsequently assigned to GMAC Mortgage LLC. But the junior lienholder, Finance Center Federal Credit Union, never released the lien for its home-equity line of credit and subsequently advanced the Brands additional funds.
After the Brands defaulted, GMAC filed a foreclosure action in September 2009, and Finance Center tried to claim priority over GMAC. But the trial court ruled in favor of GMAC based on the doctrine of equitable subrogation, and the Court of Appeals of Indiana affirmed the decision last week.
Jeffrey and Mary Michael financed their Henderson, Ky., home in August 1998 with The Money Store Home Equity Corp. In June 2000, a judgment was recorded against the property by Joseph Roberts. New Century Mortgage Corp. refinanced the Money Store loan in September 2003 and assigned the mortgage to MERS. When MERS filed a foreclosure action in May 2004, Roberts claimed his lien had priority.
A circuit court summary judgment in favor of MERS was appealed by Roberts, and the decision was reversed. MERS had claimed that the doctrine of equitable subrogation gave it priority since its lien was used to payoff an earlier lien. But the Supreme Court of Kentucky upheld the decision, noting that equitable subrogation is not available to a lienholder who has actual or constructive knowledge of a preexisting lien.
Ballard Spahr reported that the Arizona Supreme Court ruled on May 18 that a trustee can foreclose without having to show ownership of the note. The case, Hogan v. Washington Mutual Bank, N.A., et al., "should have a significant impact on pending and future mortgage foreclosure-related litigation in Arizona."
Favorable decisions were handed down in March by the U.S. District Court for the Eastern District of Michigan in two lawsuits: Collins v. Macomb County Sheriff and McLaughlin v. Chase Home Finance. In Collins, the judge rejected the purported class action lawsuit and ruled that an assignment from MERS to Wells Fargo "is plainly satisfactory to establish a record chain of title required by Michigan foreclosure statute."
In McLaughlin, the judge rejected the plaintiffs' claims of fraud, wrongful foreclosure and violations of the Fair Debt Collection Practices Act by MERS and Chase Home Finance.
Three couples filed a lawsuit in Minnesota against Deutsche Bank National Trust Co., related entities and the law firm that prepared assignments challenging the validity of mortgages against their properties. On a loan to one of the couples, the note was assigned seven times including a corrective assignment. Based on the possibility of a broken chain of title, the defendants' failure to disclose all assignments and errors and the attempt to foreclose despite the errors -- the court granted the plaintiffs' motion to remand the case back to state court and denied the law firm's request to be dismissed from the action.
Terry Pirius obtained a $345,000 mortgage on his Hudson, Wis., property from Associated Bank, N.A., in March 2004, then refinanced it with Associated in June 2006. In the interim, he closed on a mortgage with RiverBank in October 2004 and a $280,000 mortgage with Citizens State Bank in October 2006. A trial court applied equitable subrogation and held that Associated held a superior position, which Citizens appealed. But the Court of Appeals of Wisconsin affirmed the decision in an unpublished opinion.
MERS reported on May 7 that a judge in the District Court of the Seventh Judicial District in Idaho ruled in favor of MERS in the case Davidson v. BAC Home Loans. The judge rejected all counts of the plaintiff's quiet title action seeking to prevent a future non-judicial foreclosure.
Associate Judge of the Superior Court of the District of Columbia Anita Josey-Herring dismissed with prejudice a lawsuit filed by Nevada resident Barrett Bates against MERS, six mortgage lenders and two law firms, according to MERS. Josey-Herring held that use of MERS and the MERS System doesn't violate Washington, D.C., law because its code does not require the transfers of promissory notes to be recorded.
MERS reported that rulings in three Idaho cases challenging its model were made in its favor during March. Parsons v. CitiMortgage was dismissed by the District Judge for Bingham County, a district judge for Payette County dismissed the borrower's counter claim in The Bank of New York Mellon v. Boone and a federal judge adopted a magistrate judge's report and recommendation of dismissal in Bacon v. Countrywide Bank.
The U.S. Bankruptcy Court for the District of Kansas ruled in three April 30 decisions that a mortgage naming MERS as mortgagee is valid and enforceable, a news release indicated. The judge ruled in In re Van Nostrand, In re Huerter and In re Wilkinson found that there was no splitting of the mortgage and note because MERS held the mortgage on behalf of the note owner.
MERS announced that a federal judge refused to remand Pham v. Bank of New York to a Virginia state court and rejected the wrongful foreclosure complaint alleging MERS lacked authority to assign rights under the deed of trust.
Bates v. MERS was dismissed by the chancellor of the Chancery Court for Montgomery County, Tenn., according to MERS. The chancellor noted that "Tennessee is a 'race-notice' recording state that merely allows a party to record a transfer of an interest in real property, but does not require recording."
All counts of the plaintiff's wrongful foreclosure complaint were dismissed with prejudice by Superior Court Judge Cynthia J. Becker in Brown v. AmTrust. Becker ruled that "Georgia law does not preclude the holder of the security deed from proceeding with a foreclosure sale if it does not possess the promissory note."
Not all decisions in MERS cases have been favorable.
In U.S. District Court for the Middle District of Alabama, the probate judge of Barbour County, on behalf of herself and all others similarly situated, was granted a remand in her case against Merscorp Inc. The plaintiff alleges that the MERS system illegally circumvents Alabama's recording statutes for interests in real estate. She seeks an accurate accounting and index of all transfers in real estate involving the MERS system for the past ten years, an injunction ordering the defendants to comply with Alabama's recording statutes and reimbursement for any fees that should have been paid.
When Magdy Omar refinanced his loan with Homecomings Financial Network Inc. in 2004 through Fremont Mortgage, Homecomings rejected the $298,220 payoff check twice because it was $560 short as a result of accrued interest and mailed it to directly to Omar. So Omar conspired with Naser Belosa, who formed a company called Homecomings Financial Service Inc., and the check was deposited into a Bank of America account created for new company. The pair split the cash between them.
The fraud was discovered in January 2005 when Homecomings tried to foreclose, and Fremont was named as defendant on an amended complaint that claimed Fremont had a subordinate lien. Homecomings tried to hold BofA liable for the check, but the Superior Court of New Jersey, Appellate Division, upheld a decision in favor of BofA.
Herrera v. Federal National Mortgage Association.
May 17, 2012 (California Court of Appeal, Fourth Appellate District).
Bank of New York Mellon Trust Company NA, etc., Plaintiff-Respondent, -against- Eddie Sachar, Defendant-Appellant, New York City Environmental Control Board, et al., Defendants.
Index 380904/09 (New York State Supreme Court, Appellate Division).
Deutsche Bank National Trust Co. v. Rivas.
Index No. 12325/09, decided May 15, 2012 (Supreme Court of the State of New York, Appellate Division).
Hudson City Savings Bank v. Lanoue, et al.
Index No. 107305/09 (New York Supreme Court).
Ferrel L. Agard, Appellant, -against- Select Portfolio Servicing Inc. and Mortgage Electronic Registration Systems Inc., Appellee.
Case No. 2:11-cv-01826-JS, March 28, 2012 (U.S. District Court for the Eastern District of New York).
IGNACIO DAMIAN FIGUEROA, on behalf of himself and others similarly situated, Plaintiff-Appellant, versus MERSCORP, INC., a foreign corporation, DAVID J. STERN, individually, et al., Defendants-Appellees.
Case: 11-10984, D. C. Docket No. 0:10-cv-61296-CMA, field May 11, 2012 (U.S. Court of Appeals for the Eleventh Circuit).
MB FINANCIAL BANK, N.A., as successor to Broadway Bank, an Illinois banking corporation, Appellant, v. PARAGON MORTGAGE HOLDINGS, LLC; VIPUL KABARIA; JUGAL K. TANEJA; INDIRA LALWANI; CHANDRESH S. SARAIYA; and DOWNTOWN ST. PETE PROPERTIES, LLC, Appellees.
Case No. 2D10-3195, Opinion filed March 21, 2012 (District Court of Appeal of Florida, Second District).
U.S. Bank National Association, Appellant, v. Eleazar Salazar, Appellee.
Case 3:11-cv-00907-L-BLM, Bankruptcy No. 10-17456-MM13, March 15, 2012 (U.S. District Court for the Southern District of California).
Alvie Campbell and Julie Campbell, Appellants v. Mortgage Electronic Registration Systems, Inc., as Nominee for Lender and Lender’s Successors and Assigns; Wells Fargo Bank, N.A.; Stephen C. Porter; David Seybold; Ryan Bourgeois; Matthew Cunningham, and John Doe 1-100, Appellees.
Case NO. 10-1093-C368 (FROM THE DISTRICT COURT OF WILLIAMSON COUNTY, 368TH JUDICIAL DISTRICT), Case NO. 03-11-00429-CV, May 18, 2012 (TEXAS COURT OF APPEALS, THIRD DISTRICT, AT AUSTIN).
ALLAN L. KRAMER, Plaintiff, -vs- FEDERAL NATIONAL MORTGAGE ASSOCIATION a/k/a Fannie Mae; MORTGAGE ELECTRONIC REGISTRATION SYSTEMS, INC. (MERS); COUNTRYWIDE KB HOME LOANS, a Countrywide Mortgage Ventures LLC; and JOHN W. LATHAM, Defendants.
Case No. A-12-CA-276-SS, decided on May 15, 2012 (U.S. District Court for the Western District of Texas).
Richard Whitmore, Plaintiff, v. Recontrust Company, N.A., et al., defendants.
Case No. 3:12-cv-00226-MO, decided May 15, 2012 (U.S. District Court for the District of Oregon).
Jorgenson v. Bank of New York Mellon, et al.
Case No. 11-10574, decided on May 7, 2012 (Circuit Court of Oregon for Benton County).
Daniel P. Branson and Shaye Branson, Plaintiffs, v. Recontrust Co., N.A., et al.
Case No. 3:11-cv-1526-HO, decided April 26, 2012 (U.S. District Court for the District of Oregon).
Gordon Dye, an individual, Plaintiff, v. BAC Home Loans Servicing, LP, a foreign partnership; and ReconTrust Company, N.A., a federal bank, defendants.
Case No. 3:11-cv-911-HZ, decided April 17, 2012 (U.S. District Court for the District of Oregon).
Jerry Thompson, et al., Plaintiffs, v. The Bank of New York Mellon, et al., Defendants.
Case No. 3:12-cv-00066-MO, decided April 12, 2012 (U.S. District Court for the District of Oregon).
Rosario Meza-Lopez, Plaintiffs, v. Deutsche Bank National Trust Company, as Trustee for American Home Mortgage Assets Trust 2007-3, Mortgage-Backed Pass-Through Certificates Services 2007-2 Assignee, et al., Defendants.
Case No. 3:11-cv-00891-HU, decided Feb. 13, 2012 (U.S. District Court for the District of Oregon).
White v. Bank of America.
Case No. 3:11-cv-01209-ST, decided April 2, 2012 (U.S. District Court for the District of Oregon).
Stolz v. OneWest Bank.
Case No. 3:11-CV-00762-HU, decided March 30, 2012 (U.S. District Court for the District of Oregon).
Dumitrash v. Recontrust Company.
Case 3:11-cv-01062-AC, decided March 26, 2012 (U.S. District Court for the District of Oregon).
COMMERCE BANK/HARRISBURG, N.A., v. STEPHEN F. KESSLER & LISA K. KESSLER, MICHAEL KEVIN RICKER v. METRO BANK, F.K.A. COMMERCE BANK OF HARRISBURG, N.A.m APPEAL OF: METRO BANK, F.K.A. COMMERCE BANK OF HARRISBURG, N.A.
Case No. 464 MDA 2011, filed May 9, 2012 (Superior Court of Pennsylvania).
U.S. BANK, N.A., as Trustee, for Credit Suisse First Boston HEAT 2005-4, Plaintiff/Appellee, v. JOHN W. ALEXANDER, III, and LISA ALEXANDER, Defendants/Appellants, AND CITIFINANCIAL SERVICES, INC., Defendant.
Case No. 109648, July 23 2009, decided May 1, 2012 (Supreme Court of Oklahoma).
FINANCE CENTER FEDERAL CREDIT UNION, Appellant-Defendant, v. RONNIE D. BRAND, DEBORA J. BRAND and GMAC MORTGAGE, LLC, Appellee-Plaintiff.
Case No. 49A02-1111-MF-1089, decided May 24, 2012 (Court of Appeals of Indiana).
MORTGAGE ELECTRONIC REGISTRATION SYSTEMS, INC. APPELLANT, v. JOSEPH ROBERTS, APPELLEE.
Case No. 2010-SC-000069-DG, May 24, 2012 (Supreme Court of Kentucky).
Hogan v. Washington Mutual Bank, N.A., et al.
May 18, 2012 (Arizona Supreme Court).
Collins v. Macomb County Sheriff.
Case No. 2:11-cv-12999-PJD-LJM, March 23, 2012 (U.S. District Court for the Eastern District of Michigan).
JOHN MCLAUGHLIN, and DEBORAH MCLAUGHLIN, Plaintiffs, Hon. Lawrence P. Zatkoff v. CHASE HOME FINANCE, LLC, and MORTGAGE ELECTRONIC REGISTRATION SYSTEMS, INC., Defendants.
Case No. 2:11-cv-11012, March 23, 2012 (U.S. District Court for the Eastern District of Michigan).
MAGRETH MUTUA, PETER MUTUA, JOHN M. PERUSSE, DIANE C. PERUSSE, ROBERT J. PIGOZZI, and LAURA M. PIGOZZI, Plaintiffs, v. DEUTSCHE BANK NATIONAL TRUST COMPANY and SHAPIRO & ZIELKE, LLP, Defendants.
Case No. 11-CV-3761 (PJS/AJB), motions decided April 30, 2012 (U.S. District Court, D. Minnesota).
Citizens State Bank, Plaintiff-Appellant, v. Terry E. Pirius, Terry E. Pirius Trust, Paige A. Pirius Trust, Paige A. Pirius Marital Trust, Julie L. Barrett, The RiverBank, John Doe, Mary Roe and XYZ Corporation, Defendants, Associated Bank, N.A., Defendant-Respondent.
Case No. 2011AP919, decided May 8, 2012 (Court of Appeals of Wisconsin, District III).
Jack G. Davidson, an individual, Plaintiff, vs. BAC Home Loans Servicing L.P., et al., Defendants.
Case No. CV-2012-1077, filed April 12, 2012 (District Court of the Seventh Judicial District of the State of Idaho).
Parsons v. CitiMortgage.
Case No. CV-2011-2138, decided March 15, 2012 (District Court of the Seventh Judicial District of the State of Idaho).
The Bank of New York Mellon v. Boone.
Case No. CV-2011-1201, decided March 15, 2012 (District Court of the Third Judicial District for the State of Idaho).
Bacon v. Countrywide.
(U.S. District Court).
District of Columbia ex rel. Barrett Bates, Plaintiff, v. Mortgage Electronic Registration Systems, et al., Defendants.
2010 CA 002993 B, May 7, 2012 (Superior Court of the District of Columbia).
In re: Corey Van Nostrand and Misty Van Nostrand, Debtors.
Case No. 09-24265 Chapter 13, decision April 30, 2012 (U.S. Bankruptcy Court for the District of Kansas).
In re: Martin Huerter, Debtor.
Case No. 10-23175 Chapter 13, decision April 30, 2012 (U.S. Bankruptcy Court for the District of Kansas).
In re: Mark Robert Wilkinson and Theresa Jean Wilkinson, Debtors.
Case No. 09-24357 Chapter 13, decision April 30, 2012 (U.S. Bankruptcy Court for the District of Kansas).
Pham v. Bank of New York.
Case 1:12-cv-00002-TSE-JFA, decided April 10, 2012 (U.S. District Court for the District of Virginia).
Barrett Bates, Relator, on behalf of the real parties of interest, the counties of the State of Tennessee, Anderson County, et al., Plaintiffs, vs. Mortgage Electronic Registration Systems Inc., et. al., Defendants.
Docket # MCRE-10-10, April 4, 2012 (Chancery Court for Montgomery County, Tennessee).
Hugh B. Brown Jr., Plaintiff, v. AmTrust Mortgage Corp., CitiMortgage Inc., McCurdy & Candler LLC, and Mortgage Electronic Registration Systems Inc., Defendants.
Civil Action File No. 11-CV-2077-6, decided on March 26, 2012 (Superior Court of DeKalb County, State of Georgia).
AMBOY NATIONAL BANK, n/k/a/AMBOY BANK, MAGDY OMAR, and NASER BELOSA, Defendants, and BANK OF AMERICA, N.A., f/k/a FLEET BANK, Defendant-Appellant.
Case No. A-3933-09T1, decided May 24, 2012 (Superior Court of New Jersey, Appellate Division).
Sam Garcia founded Mortgage Daily in 1998 and became its full-time publisher in 2000. Prior to his news career he worked in mortgage lending for two decades.
e-mail: [email protected]