Strategic Implications of the Landmark (Kesler) Kansas Supreme Court Decision

See entire decision here > kansas-supreme-court-sets-precedent-key-decision-confirming-livinglies-strategies

See also Arkansas Supreme Court stating the same principles and citing to Kansas: arkansas-supreme-court-denies-mers-legal-standing

Annotations: See this list of cases cited by pretender lenders: Lender’s Cases




What does this decision mean? It means that there are several direct strategic moves that are suggested both by the tactics of the pretender lenders and the Justices in Kansas who are not known for their activist liberal philosophy. Most persuasive about this decision is that it was NOT a case of “Bank” or “Lender” versus Borrower. It is a case of one pretender lender against another. So we don’t have an ideological argument about whether the court was leaning toward the poor borrower/victims of this mess versus the financial institutions.

This decision was based upon simple application of basic black letter law that has been in effect for centuries.

MERS and the other nominee tactics employed in securitization of home loans is properly described as an illegal, improper scheme that causes title problems because it introduces parties into the property records of a county who have no interest in the loan, obligation, note or mortgage, no rights to enforce them, and leaves out the parties who will ultimately claim to possess enforcement rights.

MERS and the whole nominee model serve as the conduit for information about behind the scenes transactions purporting to transfer interests in real property without compliance with local law requiring recordation of those interests. It means that the security interest is not perfected.

BANKRUPTCY LAWYERS BEWARE: Those schedules showing the property encumbered by a secured mortgage and note might be wrong. One day some lawyer is going to put on a commercial asking if people have filed bankruptcy in recent years and lost their house because the house was admitted to be a secured asset when in fact it was not. It is a legal malpractice field day.

TITLE INSURERS BEWARE: Those title policies you issued where the mortgagee or beneficiary was shown as MERS or some other similar nominee might well call upon you to compensate the homeowner for loss of the property to a pretender lender who did not have any interest in the mortgage. The moment the closing was done, with full knowledge by the title company, there was a cloud on title. Either the title carrier is going to fund the correction or they are going to fund the compensation.

TRIAL JUDGES BEWARE: YOUR ASSUMPTIONS REGARDING THESE FORECLOSURES IS WRONG. As appellate courts review the basics of property law and apply those principles to securitized loans on residential real property, there will be no room for affirming your decisions unless the appellant makes procedural errors. You have already validated hundreds if not thousands of illegal, fraudulent and improperly cast foreclosures, both judicial and non-judicial. It is only Judges like Boyco in Ohio, Shack in New York, Burford in California and others who will be heralded as the ones who understood the basics of property law. The rest of the Judges will be castigated for having applied personal bias against the basic requirements of black letter law.

Landmark vs Kesler stands for the following propositions, some of which are missed because people are looking for silver bullets rather than the entire rationale of the decision:

  1. MERS is and was a straw man that has no rights, is not a real party, and cannot assert any claims, constitutional or otherwise.
  2. Setting Aside a Default: It CAN be done and the court must consider evidence outside the pleadings. “It is appropriate–and probably necessary–for a trial court to consider evidence beyond the bare pleadings to determine whether it should set aside a default judgment.”
  3. Failure to record prevents a party from asserting enforcement rights under any document purporting to establish an interest in real estate.
  4. A Motion to Distribute Surplus is an effective tool (granted in the Kansas case) by which borrowers can attack a foreclosure even after the judgment has been entered and the sale has occurred. [What most people fail to realize because it is normally absurd to assume it, is that substantial profits were made on every mortgage — particularly those that were declared in default. If you carefully build your case around the single transaction theory, then all the undisclosed profits, fees, rebates and kickbacks stemming from payments to people who performed no service in originating the loan are recoverable and probable susceptible to the recovery of treble damages. Thus payments under credit default swaps that bought out polls 30 times over are recoverable pro rata to each borrower]

41 Responses

  1. What is a mers

  2. Suggesting that the public go and sue their own lawyers who at least attempted to help them is insanity.

    To sue your bankruptcy lawyer is further ridiculous for calling the debt secured.

    This is just the mentality that keeps good lawyers from helping the public defend their homes- the crazy people out there who sue their own lawyers because they did not get a free house.

    Coaxing them to sue their defense lawyers or bankruptcy lawyers only adds to the problem that no lawyers want to truly help the public defend foreclosure the right way.

    As a FL lawyer I am completely disappointed in this post encouraging readers to sue their own lawyers who helped to the best of their abilities to get the best resolution for their client. Not all lawyers are Stopa’s or Weidner’s, and not all people can afford a proper foreclosure defense to that type of extent either. But I guess like the homes, people expect the defense lawyers to work for free too because they are “owed” it.

  3. Hi, question for anyone who can help. My house was foreclosed on and sold in a sheriff sale without serving me process of service, I’ filed to have the default judgment vacated and a counterclaim against the plaintiff.
    My question is this there was a surplus of 11,000.00 the plaintiff mailed to me and I refused to accept the check thinking it would sent a signal that I had accepted the unlawful sale of my house, now that I have filed to fight can I accept the money without losing standing to bring my counterclaim against the bank?

  4. You you could edit the page name Strategic Implications of the Landmark (Kesler) Kansas Supreme Court Decision Livinglies's Weblog to something more better for your content you create. I liked the post however.

  5. Help! So sad reading the mess we’re all in compliments of Bank of America. Is there a class action lawsuit to join in Kansas?

  6. I recently found out that US Bank and SPS are representing a securitization trust that doesn’t exist. USB/Select Portfolio Servicing have taken my house through foreclosure after several years in litigation under what’s called the pretender lender. As a Pro se, can someone tell me the best motion to file?


  7. Does Anyone Have The Original Pleedings from Landmark v Kesler from Ford County Kansas? The lady I called out there said that case is over 200 pages @ 25 cents per page. OUUCH. Looking for a link to the pdf files if anyone has them. If you are blessed enough to have a subscription to the case number is:
    06CV155. It would be interesting and EDUCATIONAL to learn from this blue print in reference to Ted Knopp’s filings and motions.

    Can Anyone Help?

  8. This question is directed toward livinglies and #4 in the begining of this post titled “motion to distribute surplus” can you please give more detail as to how one would prove or obtain the proof of all the damages you talk about including the 30 times recoverable pro rata available to each borrower.

  9. Juli

    I am just slowly learning how to navigate
    and communicate here on livinglies.

    Anything you’ve posted is fine by me.
    I may have inadvertently duplicated
    something you or someone else here
    has already brought LIGHT to because
    I am fumbling around.

    I like the spirit here. Everyone unselfishly
    contributing to cooperatively help each other.
    All of you are ahead of me on a road I wish
    none of us have had to endure. I feel I am taking
    away a helluva lot more than I can contribute.

    Thank you for your posts. If you have a question,
    If I have any insight on it, I will chime in.

    Mostly I am trying to see how I can tame the
    MERS-BEAST before he has a chance to BITE me.
    My time to accomplish that has about RUN out

  10. zurenarrh,

    Oh I see your post, I thought maybe you had not seen it, but my cabe fell out of the computer, when I reset I saw your post. Yes of course as I said, it was not meant for you, but for Deontos.

    thank you.

  11. Deontos, I am sorry, I had written a post to you last night and I sent it to the wrong name.

    it is below, or will be on October 4th, 2009 at 9:17 pm Said:

    below, following my note here,

    REGARDING Riegle Ruling Referenced in Juli’s Comment::
    “Comment on Strategic Implications of the Landmark (Kesler) Kansas Supreme Court Decision by Juli
    from Comments for Livinglies’s Weblog by Juli

    I really find your posts interesting. I do not at this point have any claim filed against MERS, but they really started the boulder rolling down the hill a chasin me.

    And there way was very unethical, so it appears at this point.

    But truley they have so many issues with standing. I think you misunderstood my comment along with the post, because I was just noticing it is so much of the same really, different in presentation, but when it comes down to it, they all have a lot of the same issues, not just them, all of many of the Lenders.

  12. zurenarrh, I am sorry this was actually meant for Deontos
    I was also writing to you re the letter, and researching ever since. Plus I am trying to check out something with Adobe Photoshop to see if I can prove the forged signatures.

    Very good MERS info, I had written the depositon (written request and was about to send it, but when I saw you post, I thought twice)
    After looking at it I think at this stage I can’t really go that far with them, they are “Assignor” for the Lender, I do not want to Validate anyone, all these people staking their claim on your house is so crazy and scary.

    I think I start to go in a different direction, but mostly for this foreclosure I have tried to encapsulate the time since this phase started. I keep hearing myself say, too much, keep it simple, my focus is these people should have been stopped at the from steps to the Court House. I found some really good and helpful info on standing and

    I have so much against them it is insane. I saw the email they sent me, and I looked at their site, and was just amazed. It looks like a 1st grader put the business plan together. Don’t you look at the “Rules” on their site and just go, I cannot believe this is a company that has gotten away with SO much.

    Still there is so much fraud and lies really in that document the allege is a mortgage, it is out of control. Thank God for these individuals who have worked so hard chipping away at the system, I know I am not a lawyer, but it is even difficult for them, because of the whole attitude, and the fact that as it turns out, this modern day, Highway Robbery tale is ending up falling back on such old and left alone, I guess, laws that no one wants to take it seriously.

    Please let justice prevail. When I saw someithing, Neil wrote to someone, keep it simple with just the TILA etc for the Judges don’t even know what is going on.
    With out poeple like Neil, who do have credability , we would still be up that creek. This is a lot of work, and so emotional for obvious reasons. But hope springs eternal, I say that each time I Catch 22. a little laugh.

    Sorry about the mix up. I have to address Deontos.
    I have mostly replied to others and sent comments to some of the very intesting articles and posts.
    You are a very smart person, and I wish you the best.
    I like the part of the letter I saw, maybe I will put this together, for another issue, that is haunting me, it is not much but the creditor will not stop calling, I told them I wanted some info. documentation, because we have been down the identity theft rd. and when it rains it pours. I am happy to pay off debt that I have legitimately, but they don;t want a bit at a time, they say “I’ll just tell the creditor, you refuse to pay”, then they hang up.

    Not so far in to the past that would have made me so mad, I would have immediately talked to anyone there and everywhere I could, but now, I am so wrapped up in this, nearly, no it is over 3 years since this started. I filed against the 3 patties, in June of 07, so this has been really tough, I know I am preaching to the Choir.

  13. Juli,
    Not sure if you’re addressing me or referring to something I said. I personally have no complaints about your comments and certainly you do not owe me an apology of any kind.

  14. zurenarrh, on October 4th, 2009 at 9:17 pm Said:

    below, following my note here,

    REGARDING Riegle Ruling Referenced in Juli’s Comment::
    “Comment on Strategic Implications of the Landmark (Kesler) Kansas Supreme Court Decision by Juli
    from Comments for Livinglies’s Weblog by Juli

    I don’t think I saw this on here, if so, sorry.
    This is what we are all talking about and in my own case the scenario begins to sound like an old person repeating the same story over and over

    I am not sure I understand. Are you saying I should not be commenting in a general way and adding other cases? I want to apologize if this is the case. Every site has certain protocol, but my time has been so crazy, mainly I have been reading more than writing, my case took a very crazy ride on a roller coaster.

    I did not know the protocol to download info, I sent it to Neil, to make sure it was on the level, I figured it could be deleted. My comment simply meant in many forms , be they foreclosure or bankruptcy even in my case prior to foreclosure I knew they were trouble, but when they sent this complaint, and did everything wrong, I started reading more than usual about them.
    I had found the article and thought the request you made for any help for another member, could be helped by more reading. I also sent other personal comments, from my own experience.


  15. Notable Excerpt from Kansas Appeals Court Decision. NOT TO BE CONFUSED with the **SAME CASE** that was then REVIEWED and AFFIRMED by the Kansas Supreme Court. The citations may be of interest for reference and research?

    Landmark Nat’l Bank v. Kessler,
    2008 Westlaw 4180346 (Kansas App. 9/12/08)

    We do not attempt in this opinion to comprehensively determine all of the rights or duties of MERS as a nominee mortgagee. As the mortgage suggests may be done when “necessary to comply with law or custom,” courts elsewhere have found that

    MERS may in some cases bring foreclosure suits in its own name. ,
    965 So. 2d 151 (Fla. Dist. App. 2007).

    On the other hand, some have suggested potential problems created by MERS’s practices, ,
    8 N.Y.3d 90, 100-04,
    828 N.Y.S.2d 266,
    861 N.E.2d 81 (2006) (Kaye, C.J., dissenting),

    or with the handling of paperwork documenting who owns what in the residential-mortgage industry in general. ,
    386 B.R. 374, 385 (Bankr. D. Mass. 2008); ,
    2007 WL 3232430 (N.D. Ohio 2007) (unpublished opinion).

    In this case, we are only required to address whether the failure to name and serve MERS as a defendant in a foreclosure action in which the lender of record has been served is such a fatal defect that the foreclosure judgment must be set aside. We hold that it is not.

    Blog Post:
    A lawyer commenting on this Appeals decision as of 9.18.08

    This is really quite an awful opinion awful for MERS and still another body blow to securitized mortgages if it stands. It formally addresses only a narrow point of law, but does not appear to acknowledge established law that is relevant to the eventual outcome of the case, so were left uncertain as to what the court really intends There will be an **appeal**, but right now it’s the law in at least part of Kansas and will start the wolves howling elsewhere as well.
    (me: Of course there was an “appeal” and it got “awfuller” for the MERS cohort. As we all know the Kansas Supreme Court AFFIRMED the Appeals Court.)

    But there is MORE and this demonstrates interesting unintended outcomes that could inure from widespread adaptation of Landmark Nat’l Bank v. Kessler; especially “Comment 2” …………

    From same Blog:

    Comment 1: This case certainly does some damage to MERS claims in other courts that it is entitled to bring foreclosure actions or perform other functions as the nominee of the owner of the note and mortgage. The relatively unusual context of the foreclosure of a first mortgage may limit the damage, but it is still significant, as it permits foreclosure of junior mortgages held by MERS as a nominee of record without notice or hearing.

    Comment 2: According to hearsay, the property sold at foreclosure to third parties for $90,000 – significantly more than the $60,000 debt; and Kessler, who had defaulted at the foreclosure proceeding, got wind of this and appeared in court to collect his $30,000 surplus. He apparently has declared bankruptcy and discharged the $90,000 debt, so if Sovereign loses its security interest here, Kessler will get to keep the money. Kessler still apparently also has statutory redemption rights, and the property in fact may be worth close to $130,000. Kessler will be able to redeem that property for $90,000 and reap another $40,000 gain – a $70,000 windfall when he didn’t even show up. That’s show business!!

  16. Regarding the local Nevada article Juli posted….

    Christopher Peterson, author of the very insightful and easy-to-read paper on MERS and a law professor, is quoted as saying this:

    “MERS has no ownership interest, but they put MERS’ name there instead of the lenders’ name. No legislature said they could do that.”

    It’s a very good point. What MERS is doing and has been doing is a matter of MERS company policy, not the law. It’s as simple as that. Since the judges don’t work for MERS (hopefully MERS doesn’t try to coerce them become “assistant secretaries” or “vice presidents” of MERS during trials), and we don’t work for MERS and/or are not MERS “members,” we are not bound to follow the company policy of MERS.

    It’s unclear from the article whether or not Peterson said this, since it is not directly attributed to him or in quotes:

    “Although the homeowner would still owe the lender money, if it wasn’t a legitimate mortgage, then it becomes an unsecured loan, like a credit card.”

    But I would take exception to the idea that “a homeowner would still owe the lender money.” If I were in a situation in which it was acknowledged that my note is not secured by a deed of trust, I’d break out the debt validation letter I mentioned before and then not worry about it any more.

    Finally, a Legal Aid lawyer was paraphrased as saying the following:

    “Lenders merely need to transfer the notes from MERS into the name of a trustee that has the authority to foreclose, he said.”

    Either the writer of this article or the attorney who was paraphrased as saying this didn’t do enough research, because you can’t “transfer the note from MERS”–MERS doesn’t own the notes! Furthermore, if a court acknowledges that the note is unsecured, that means foreclosure is impossible. The only thing left for anyone to go after is the money “owed” on the note–and as long as no one can produce a note, they are $#!+ out of luck.

    But I didn’t go to law school or anything, so don’t take my word for it.

  17. Juli,
    You said:

    “I want to once again demand to make notice to any party actually having a claim on my home, A REAL LOSS… ”

    I have a great debt validation letter that mentions that very point when it says the following:

    “(h) Affidavit of debt & damages: Please provide me with an affidavit of debt and damages incurred, sworn to be true, correct, complete, and not misleading, by a properly identified and authorized officer of the alleged creditor, hereinafter “affiant,” upon his or her personal knowledge (FRE Rule 602) stating:

    (i) that the alleged creditor is, indeed, the secured party and holder in due course of the aforesaid alleged original agreement in issue and has an enforceable perfected security interest therein pursuant to and in compliance with the Uniform Commercial Code (“U.C.C.”) Section 9-203, Section 9-204(1), and Section 9-305, or equivalent sections of the Commercial Code of [Insert your state here];

    (ii) that the alleged creditor provided consideration to me, the alleged debtor, from the assets they had on hand before the alleged credit was made, and incurred a financial loss under the full and complete alleged original agreement and alleged debt, and state each and every loss that the alleged creditor has incurred to date under the alleged debt in issue…”

    This is only a small part of the letter, but obviously a very important part. This letter has worked wonders for me where credit cards are concerned. In fact, it has gotten to the point where debt collectors don’t send me letters anymore because they know I’ll challenge them with this letter and they can’t rise to the challenge. They still call me, but I just don’t answer the phone when I see a number I don’t recognize.

  18. REGARDING Riegle Ruling Referenced in Juli’s Comment::

    “Comment on Strategic Implications of the Landmark (Kesler) Kansas Supreme Court Decision by Juli
    from Comments for Livinglies’s Weblog by Juli

    I don’t think I saw this on here, if so, sorry.
    This is what we are all talking about and in my own case the scenario begins to sound like an old person repeating the same story over and over

    Ruling by judges rattles mortgage industry
    Some foreclosures may at least be slowed”


    This is regarding “Standing” to obtain “Relief from Stay”. Riegle concluded MERS lacks “standing”. Stay tuned on this ……. It might
    really wreak havoc on the MERS menace in Nevada.


    * * * * * *
    In re ) Case No. BK-S-07-16226-LBR
    ) Chapter 7
    Debtor(s). )
    ) DATE: August 19, 2008
    ) TIME: 3:30 p.m.
    ________________________________________ )

    Mortgage Electronic Recording Systems, Inc. (“MERS”) through various counsel has filed a number of motions to lift stay. Some of the motions were filed in the name of MERS, 1 while others have been filed in the name of MERS as the nominee for another entity. An order for joint briefing was entered because the substantially same issues were presented in the motions, and a joint hearing was held. Mitchell (#07-16226) has been designated as the lead case. The trustee or counsel for the debtor in these cases has opposed the lift-stay motions on the grounds of standing and that MERS is not the real party in interest.

    The initial response filed by MERS contained no evidentiary support. Rather it described the role of MERS and its members by relying on law review articles and the recitation of facts in other cases in other districts involving MERS. Prior to the initial argument, MERS attempted to withdraw the motions filed in all but four of the cases. MERS then filed a declaration at the court’s direction explaining why the motions were withdrawn. The declaration of William Hultman was filed in Dart. The declaration, in addition to explaining MERS’ rationale for 3 withdrawing the motions, also attached as exhibits copies of the MERS Membership Application, the MERSCorp. Inc. Rules of Membership, the MERS Procedural Manual, and the MERS Terms and Conditions of Membership. The court also requested appropriate evidentiary 4 support for the allegations concerning the relationship between MERS and the entities for whom the motions were brought. A supplemental declaration was filed in Michell, the lead case.5 As noted, MERS has attempted to withdraw all but four of its original motions, leaving only Dart (#08-11007), Hawkins (#07-13593), Ramirez-Furiati (#08-10427), and Zeigler (#08- 10718). MERS admits that it failed to follow its own procedures in the motions it wants to withdraw. The debtor, the chapter 13 trustee, and MERS subsequently stipulated to a lift of stay 6 in Ramirez-Furiati which the court approved with the acknowledgment that the order contained no finding about MERS’ standing. This court will discuss the issues raised in the motions that MERS attempts to withdraw, and by this order issues its ruling in Dart and Hawkins, which are 8 the two cases that are now pending before it. 9

    The court has advised the parties that it would consider any information contained on the MERS website at unless an objection was made. No objection has been filed by either party. The court thus takes judicial notice of the contents of the MERS website. …………………………..

    The lift-stay motions in Dart and Hawkins are denied. MERS may not enforce the
    notes as the alleged beneficiary. While MERS may have standing to prosecute the motion in the name of its Member as a nominee, there is no evidence that the named nominee is entitled to enforce the note or that MERS is the agent of the note’s holder. Indeed, the evidence is to the contrary, the note has been sold, and the named nominee no longer has any interest in the note.


    full file:

  19. In response to Juli

    Juli, on October 3rd, 2009 at 7:00 pm Said:
    to Deontos,
    this article was very interesting, to me anyway.


    Thank you! I will review this as soon as time permits.
    Every tidbit helps us all here.

  20. and the think is when we get to this point this is when I plan to make my demands again.

    I did make them in my response to the foreclosure I was NOT served but came across after becoming suspicious of the many solicitations to rescue me No one has said anything about my cross complaint and I brought it up in court at the Court Management meeting, no real response.

    I want to once again demand to make notice to any party actually having a claim on my home, a real loss, and demand a date to be in court and if there is no one out there, I would like to have the Judge name my Home Unencumbered. My title is so cloudy you can hardly see the house, with out this or a quiet title or some equal result, this house will always be a thorn in the neighborhood, but it will also affect all my neighbors.

  21. I don’t think I saw this on here, if so, sorry.
    This is what we are all talking about and in my own case the scenario begins to sound like an old person repeating the same story over and over

    Ruling by judges rattles mortgage industry
    Some foreclosures may at least be slowed

    By J. Patrick Coolican (contact)

    Saturday, Oct. 3, 2009 | 2 a.m.
    Sun Topics

    * Real Estate in Crisis
    * Sun business and economy coverage

    A bankruptcy judge here, joining judges across the country, is throwing a bit of sand in the gears of the mortgage machine and its ruthless foreclosure blade.

    She has raised this issue: In many home foreclosures springing out of bankruptcy proceedings, the foreclosure is being triggered by a representative of the lender — a surrogate that may not have a legal, equity stake in the proceedings.

    As a result, it is conceivable — though still something of a legal long shot — that the homeowner who is filing for bankruptcy protection could end up saving his house.

    The argument that a lender’s surrogate can’t trigger foreclosure has drawn notice of Nevada homeowners, who are preparing a class action lawsuit. They are seeking a preliminary injunction this month to stop their foreclosures.

    First, some background:

    Law and custom have long required that property transactions be recorded with a county clerk or “recorder of deeds,” along with information about the person who holds the mortgage, and, if there are multiple mortgages, the place in line of each creditor.

    For big lenders, tracking that information in hundreds of jurisdictions across the country was an onerous process, so the biggest, including Fannie Mae and Freddie Mac, set up a company that would do it all electronically. It is called Mortgage Electronic Registration Systems and is recognized by its acronym.

    The MERS name wound up on millions of mortgages, including more than 987,000 in Nevada alone, according to the company.

    Once people started defaulting on loans, MERS would announce the default on behalf of its bank clients. Consumer activists and attorneys for homeowners began questioning whether MERS, which represents banks but has no direct financial interest in the loans, could legally trigger foreclosure, but judges were generally not sympathetic to the argument.

    Christopher Peterson, a law professor at the University of Utah’s S.J. Quinney College of Law and a former consumer rights attorney, called the emergence of MERS a somewhat dubious development and said it called into question the legitimacy of mortgages recorded in its name:

    “MERS has no ownership interest, but they put MERS’ name there instead of the lenders’ name. No legislature said they could do that.”

    Peterson has been hired by the Reno law firm Hager & Hearne as an expert witness in a class action lawsuit that will seek to invalidate the right of MERS to trigger foreclosure.

    Their case will rely heavily on a recent Kansas Supreme Court ruling. In that complicated foreclosure case, the court decided this month that MERS had “no right to the underlying debt repayment secured by the mortgage …”

    Paul Habibi, a real estate expert at UCLA’s Anderson School of Management, said the decision, though not binding on other states, is a potentially important precedent that “renders MERS somewhat ineffective to proceed with foreclosure.”

    The New York Times took note of the decision this week, with columnist Gretchen Morgenson saying the ruling called into question MERS’ entire business model.

    How the Kansas argument plays out in Nevada remains to be seen.

    Nevada is a nonjudicial foreclosure state, meaning foreclosure doesn’t require a judge’s approval. Trustee companies such as Fidelity National Default Solutions hold the title to the loan for the lender, and they are authorized to foreclose, explained Michael Joe, an attorney for the Legal Aid Center of Southern Nevada.

    Still, the judicial backlash has hit MERS in Nevada, and could affect people in bankruptcy proceedings especially.

    A person facing foreclosure is not necessarily in bankruptcy. But when the homeowner does file for bankruptcy protection, a lender — or, in this case, MERS — that wants to protect its assets must get permission from the federal bankruptcy judge to foreclose.

    And in a Las Vegas case this spring, federal Bankruptcy Judge Linda Riegle ruled that MERS had no standing because the company is not the real party in interest — it doesn’t actually own the loan. In other words, in the course of bankruptcy proceedings, MERS had no claim to the house.

    Peterson thinks this could be significant.

    “When a court says MERS has no standing, that is a decisive step” in saying the mortgage wasn’t properly recorded, Peterson said. If the mortgage wasn’t properly recorded, it wasn’t legitimate.

    Although the homeowner would still owe the lender money, if it wasn’t a legitimate mortgage, then it becomes an unsecured loan, like a credit card.

    Bankruptcy proceedings, Peterson said, are all about “who has priority?”

    In establishing the priority in which debtors get paid, creditors holding the unsecured debt of the bankrupt, like credit card companies, go to the back of the line, and a bankruptcy judge can give significant relief to the debtor, including reducing the principal of the loan. Or in this case, the judge could refuse to give the house to the lender and arrange new loan terms.

    Joe, who has represented scores of Nevadans hit with foreclosure, said, “I like the argument, but I’m not sure it wins.” Lenders merely need to transfer the notes from MERS into the name of a trustee that has the authority to foreclose, he said.

    Although that effort would be a major headache because of the nearly one million Nevada mortgages on the MERS system that would have to be transferred, it’s doable, Joe said. He added that there’s evidence it’s happening.

    MERS would respond only to written questions submitted by the Sun.

    The company will appeal the Kansas case, company spokeswoman Karmela Lejarde wrote.

    “The ruling is confusing and goes against long-standing precedent,” she said.

    She disputed the assertion that MERS has no financial interest in the loans on which it is listed.

    The fact that MERS transfers the proceeds of the loan to the lender doesn’t mean it doesn’t have a “protected property interest.” That property interest, the company alleges, was unfairly and illegally taken by the recent court decisions.

    Lejarde noted that several Nevada cases went the other way and bestowed ownership rights to MERS.

    “As the mortgagee, MERS possesses all of the rights of the lender,” Lejarde concluded, “including the right to foreclose the mortgage.”


    to Deontos,
    this article was very interesting, to me anyway.

  23. don’t forget, your losses go way up if you are foreclosed on, if you are going to pursue.

  24. To the case posted, I can’t remember now, did the Judge determine MERS is owner? The

    One think I found, don’t know if I mentioned earlier, the timing of their assigning. Look at the time and date of foreclosure and assignment and lis Pendens at County Clerk.
    The little details can tell a story, not tried and true yet, but this is my statement as well. MERS actually the Lawyer for the New Pretender Lender is the person to file foreclosure. Now saying that I see that is right there strange, not only for obvious reason The Mortgage company’s attorney is the one who file the foreclosurea day late the filed foreclosure now at that time MERS says they are acting as Nominee to the Now Former Owner, but infact they would be acting for the new owner. but the new owner then filed a lis Pendens an assignment for NOMINEE MERS, who was acting as owner. The signing of the doc the attorney made to foreclose with the “CERTIFIED SIGNER” WAS THE DAY BEFORE the foreclosure. Well by their own signing they were already own but MERS claims to rep the prior owner.

    Neither of the mortgage companies were listed a Active members on MERS site. Have you checked their? in fact I searched the MIN and my SS and there was NADA found

    Was MERS listed as nominee in the mortgage?

    A week after they filed foreclosoure on me they, the original party or the 3, assigned the mortgage to the next company, the did not warn me, they did not record it.

    They also served the foreclosure notice on an invisible man. Who just happens to not live here, but also, he was at an Dr. appointment that moment. Funny Huh?

    Next the Newest of New Mortgage companies assigned the holdership(real word?nah it works though) to their little own self. Now that is what good Soap Operas are made of.

    zurenarrh, you have to find out who she works for, the “certified signer” and the Notary, aren’t they suppose to be a notary that would be local to the court, the same state? you said Texas I think, and I got that you are in CA

    I think the same thing they MERS would be responsible and why would not the court be guilty of something if they allowed on no evidence the evidence as owner, or is that not the case with you? I might be thinking of the case Deontos linked.

    And anther ting, don’t they have to record ALL assignees? that has to be easily traceable. Trying to put the pieces of paper together one paper at a time, I still find things wrong. What is your case, is it in foreclosure? The Mortgage company is also double dipping, because they are the Defendant, me as Plaintiff, and they put someone on me to Foreclose, well even if it doesn’t work, they shake me up, which they did, and then they make meetings in that case with the Judge in that case, Case Management. we are at the end, just about, for discovery. They maybe think they will have a better position, I think not.

    it seems more like a present, maybe that is the intention, I don’t know, they, I believe have sold this in more than one pool, not to mention so now the last 2 transactions, they have profited so much overly so, and now they try and completely disenfranchise me.

    You have to prove the damages an show the court they don’t have standing, or did not if you were foreclosed on.
    All the money you have lost on Equity, money in repairs, what about the interest? that too. attorney fees, what about all the therapy me and my kids need? you know how stressful this is. Not knowing where you will go the day may be coming, nervous all the time, no time to do anying of real value with work, for the time spent on the case. Litterally up to 20 hours a day, sometimes with out sleep.

    Yes it really does stink. My nest is not a nest anymore, it is a twig on a medial strip on, no a traffic cone in Times Square, wow, that birdy is trying to catch her chance to get out of this, but the traffic just keeps coming, she can’t even feed her little birdie baby’s worms or bugs, the roaches are bigger than her, and the french fries are too greasy. But worst of all the little baby birdies, they are about to fledge and she is so busy looking at the fire trucks roaring past that she just might miss this milestone, and they may be street pancakes. not nice. Do you have any idea how quickly those rubber cones squish and fall and fly? Pretty fast.

  25. From the Case File mentioned by Dan in prior Comment. (Posted BELOW)

    Looks like some BK courts are stomping on MERS
    “Lack of Standing”.

    Sure like it if some of you veteran Pro Se’s or Professional legal
    minds would review this whole case file and see if there are any
    GOLD NUGGETS in it. I without proper experience and
    background have posted a snippet of what seems tactically and
    strategically important “reference” to the common offenses and
    defenses we are trying to construct and pursue here.


    IN RE )
    ) Case No. 08-20577-TLM
    fdba Porto Uniao, Pain Management ) Chapter 7
    Psychology, Injoy, Wilhelm Ranches, )
    Living Waters Coordinated )
    Communities, Porto Allegre, )
    Debtor. )
    ________________________________ ))
    IN RE )
    ) Case No. 08-02856-TLM
    ) Chapter 7
    Debtor. )
    ________________________________ ))
    IN RE )
    ) Case No. 09-20024-TLM
    dba The Offerman Auctions Services, ) Chapter 13
    fdba Showroom Cars Unlimited, )
    Debtor. )
    ________________________________ )
    IN RE )
    ) Case No. 09-00124-TLM
    TYLER K. CROFTS and )
    KODI C. CROFTS, ) Chapter 7
    Debtors. )
    ________________________________ )
    1 See Applegate Doc. No. 16; Wilhelm Doc. No. 77.
    2 See Laford Doc. No. 52.
    3 See Lenhart Doc. No. 35.
    IN RE )
    ) Case No. 09-20400-TLM
    fdba Affordable Elegance, ) Chapter 7
    Debtor. )
    ________________________________ )




    A. Real Party in Interest and Standing
    To obtain stay relief, each Movant must have standing, and be the real party
    in interest under Federal Rule of Civil Procedure 17.12 See, e.g., In re Sheridan,

    The relevant language regarding MERS is as follows: Initially, the deeds state:
    The beneficiary of this Security Instrument is MERS (solely as
    nominee for Lender and Lender’s successors and assigns) and the
    successors and assigns of MERS.

    E.g., Wilhelm Doc. No. 75, part 3 at 2. The deeds then typically provide that:
    Borrower understands and agrees that MERS holds only legal title to the
    interests granted by Borrower in this Security Instrument, but if necessary
    to comply with law or custom, MERS (as nominee for Lender and Lender’s
    successors and assigns) has the right: to exercise any or all of those
    interests, including, but not limited to, the right to foreclose and sell the
    Property; and to take any action required of the Lender including, but not
    limited to, releasing and canceling this Security Instrument.
    Id. at 3.

    11 See Applegate Doc. No. 14, part 4; Crofts Doc. No. 34; Laford Doc. Nos. 68 and 69;
    Wilhelm Doc. No. 75, part 4.

    Federal Rule of Civil Procedure 17(a)(1) provides:
    An action must be prosecuted in the name of the real party in interest. The
    following may sue in their own names without joining the person for whose
    benefit the action is brought: (A) an executor; (B) an administrator; (C) a
    guardian; (D) a bailee; (E) a trustee of an express trust; (F) a party with
    whom or in whose name a contract has been made for another’s benefit; and
    (G) a party authorized by statute.

    Relevant “NOTES”………

    Although Bank of America/HSBC argue they are entitled to rest upon the allegations in their motions, they also submitted declarations in an effort to establish standing. See, e.g., Laford Doc. No. 72, at 7 (under the heading “Evidence Before the Court,” Bank of America
    argues that the Court has before it both the “Motion . . . whereby Secured Creditor alleges its interest in the Property” and “a Declaration under penalty of perjury that it holds the original
    promissory note and is entitled to payment on the loan”).

    The Court questions whether the declarants appreciated the legal significance of the term “holder” and meant to assert the legal conclusion, or whether they simply signed form declarations provided to them, presumably by Counsel. Further, Movants cannot rely on these declarations to demonstrate that Movants are nonholders in possession of the notes, with rights to enforce. See Idaho Code § 28-3-203, cmt. 2. Not only do the declarations fail to actually state
    that Movants possess the notes, there is no foundation for any such statement. See generally Fed. R. Evid. 602 (witness “may not testify to a matter unless evidence is introduced sufficient to support a finding that the witness has personal knowledge of the matter”). Nor is there foundation for the declaration testimony regarding Movants’ purported ownership interest in the notes.
    See generally Fed. R. Evid. 602, 803(6).

    See Applegate Doc. No. 14, part 4 (Dec. 23, 2008 assignment); Crofts Doc. Nos. 34 (unrecorded May 5, 2009 assignment); Laford Doc. Nos. 68 (unrecorded May 5, 2009 assignment);
    Laford Doc. No. 69 (unrecorded May 5, 2009 assignment); Wilhelm Doc. No. 75, part 4 (unrecorded Apr. 29, 2009 assignment).

    The Court here looks to the assignments, because Movants cannot rely upon the declarations to establish the transfer. Among other things, the declarations lack foundation, either to authenticate the documents (none of which are self-authenticating under Federal Rule of Evidence 902(4)) or to establish that Movants purchased the notes at issue. See Fed. R. Evid. 602; In re Mitchell, 2009 WL 1044368, at *6 (discussing evidentiary problems with declarations
    supporting stay relief motions)


    Movants lack standing to seek stay relief. The objections to the Laford and Lenhart Motions will be sustained, and all pending motions will be denied without prejudice.

    The Court will issue an Order so providing.
    DATED: July 7, 2009

  26. RE: Dan Williams, on October 1st, 2009 at 11:47 am Said:
    “Regarding interesting relationships between loan servicers,
    trustees and MERS….”


    Do you have access to the Idaho “Case File” you
    mentioned in the above post?

    If you do, could you please post it. It might
    have helpful insights for a lot of us here.

    Thank you!

  27. Regarding interesting relationships between loan servicers, trustees and MERS, check out the firm of McCarthy & Holthus; whose managing members are all officers of Quality Loan Servicing in Washington State; servicing loans for numerous lenders; the managing partner of its Washington state location, Matthew Cleverly, is also the registered agent and managing principal for Quality Loan’s Washington State location, and I’ve no doubt, an officer of MERS. They tout their expertise in bankruptcy matters, especially in Relief from the Automatic Stay. The same principlal of the Quality Loan Washington State, and Managing Partner of McCarthy Holthus in Washington, was recently made an example of in Idaho Bankruptcy Court for, I believe, 6 different cases where the Court denied all of his motions based on MERS lack of standing and not being a real party in interest. The bankruptcy judge also pointed out the ridiculous manner in which assignments were made in an attempt to prove standing to foreclose – basically called him a fraudulent attorney with fraudulent clients. Decision July 7, 2009 Terry L. Myers – Chief U.S. Bankruptcy Judge – Idaho.

  28. Juli,
    This obviously stinks to high heaven. Reading the MERS rules you posted, I see that they mention that people like Jill Arnold can become “certifying officers” for MERS even though they aren’t MERS employees. Ms. Arnold must have been ultra-certified, because she acted on behalf of 3 different companies. I’m not even sure which one of those she ACTUALLY works for, if any, though my guess is Recontrust (because the address of the notary that signed them all is listed in the Texas notary public database as being employed at a Recontrust address in Texas).

    Neil has hinted before that this is most likely illegal, but I’m not sure what laws it would be violating. As I mentioned in my earlier post, all I can come up with is RICO, or racketeering, or collusion, or something like that. It’s definitely fraud, though–notice how even in MERS’ own rules, they put quotes around “certifying officer,” as though acknowledging that such a title is a complete farce.

    Looking at my Deed of Trust for the millionth time, I notice this phrase regarding MERS (which I’ve read before, but like a great novel, my Deed of Trust reveals new meaning every time I read it):

    “MERS is acting as nominee for…Lender’s successors AND ASSIGNS.”

    By its own rules, however, MERS say no assignments of the Deed of Trust/Mortgage are necessary when the Note changes hands, particularly between MERS members. The administrator on the MERS forum put it this way:

    “Note ownership is transferred via endorsement and delivery of the promissory note which is also a non-recordable transfer. MERS continues to hold the mortgage lien interest as the mortgagee of record during these non-recordable transfers. NO ASSIGNMENT OF THE MORTGAGE LIEN IS NECESSARY [zurenarrh’s emphasis].”

    So if the members are following MERS rules, THERE ARE NO “ASSIGNS.” Accordingly, when Countrywide sold my Note to Fannie Mae, there was no assignment of the Deed of Trust. MERS was supposedly the “nominee” of Countrywide, but CANNOT be the nominee of Fannie Mae under the language of the Deed of Trust because Fannie Mae would have to be an “assign” and there was no assignment, so Fannie Mae is not an “assign” of Countrywide. And therefore MERS is not the nominee for Fannie Mae and cannot act on its behalf (even with a “certifying officer” of MERS signing documents saying otherwise) and now assign not just the Deed of Trust but also the Note.

    And of course, MERS was NEVER a “beneficiary” in any sense of that word, legal or otherwise.

    One last thing–none of these MERS policies is the law. They are simply that–MERS company policies MASQUERADING as the law. Big difference.

    Disclaimer (with apologies to Jay-Z): I ain’t passed the bar but I know a little bit–enough that MERS wants to illegally steal my $#!+.

  29. Juli

    keep with it and don’t back down. Your Passion will prevail.


  30. zurenarrh,
    what a coinsidence, I have a party who, as number 2, no 3 not counting MERS, has been assigned to a new company, who named another Party as Owner. A few weeks later I found them to be the Owner one of their companies, they alone are 3 companies in one.

    According to their VP, and Insurance Department, they would be filing foreclosure. Pretty unreal. Do you think the company actually believes it is in first place? Have not heard nothing from them. They would not give me their recorded total payoff. I never verified to them,but told them they could not have a right to a mortgage on my home, because the mortgage had been rescinded. They told me they would take that on, the company that bought (my) loan mostly bought distressed loans. There you go I am up to minimumly, 10 parties.

    But this is the best of all: Their Rules, or part of, particularly amazing. Quite the Masterpiece.
    Section 2. MERS shall provide to Members certain standard reports concerning
    information contained on the MERS® System, as specified in the Procedures, and such other
    reports as MERS may determine from time to time.
    Section 3. (a) Upon request from the Member, Mortgage Electronic Registration
    Systems, Inc. shall promptly furnish to the Member, in accordance with the Procedures, a
    corporate resolution designating one or more officers of such Member, selected by such Member,
    as “certifying officers” of Mortgage Electronic Registration Systems, Inc. to permit such Member
    (i) to release the lien of any mortgage loan registered on the MERS® System to such Member, (ii)
    assign the lien of any mortgage naming MERS as the mortgagee when the Member is also the
    current promissory note-holder, or if the mortgage is registered on the MERS® System, is shown
    to be registered to the Member, (iii) to foreclose upon the property securing any mortgage loan
    registered on the MERS® System to such Member, (iv) to take any and all actions necessary to
    protect the interest of the Member or the beneficial owner of a mortgage loan in any bankruptcy

    And they got away with it because the Government let them, they are not alone in this. Its just us ho9meowners, the carrots and the investor bunnies, we are all toss-able. It is not so much expecting a hand out, I don’t really want the Govt (meaning taxpayers) to give me $, I want the fault to lie in the hands of the company who put my and my husbands signature to various documents without our even being there. It’s MAGIC!

    proceeding regarding a loan Registered on the MERS® System that is shown to be registered to
    the Member, (v) to take such actions as may be necessary to fulfill such Member’s servicing
    obligations to the beneficial owner of such mortgage loans (including mortgage loans that are
    removed from the MERS® System as a result of the transfer thereof to a non-Member), (vi) to
    take action and execute all documents necessary to refinance, amend or modify any mortgage
    loan registered on the MERS® System to such Member, (vii) endorse checks made payable to
    MERS to the Member that are received by the Member in payment on any mortgage loan
    registered on the MERS® System that is shown to be registered to the Member. In instances
    where Mortgage Electronic Registration Systems, Inc. designates an officer of a Member as a
    certifying officer of MERS for the limited purposes described above, such Member shall
    indemnify MERS and any of its employees, directors, officers, agents or affiliates against all loss,
    liability and expenses which they may sustain as a result of any and all actions taken by such
    certifying officer.

    (b) Upon request by Mortgage Electronic Registration Systems, Inc. , the Member
    shall deliver to Mortgage Electronic Registration Systems, Inc. a corporate resolution naming the
    Corporate Secretary of Mortgage Electronic Registration Systems, Inc. as a “certifying officer” of
    the Member solely for the purpose of installing Mortgage Electronic Registration Systems, Inc.
    as mortgagee of record on mortgage loans which have been registered on the MERS® System by
    the Member.
    like smallz said
    (((shaking my head))) You can’t make this *beep* up folks!

    And yeah I often wonder if they read these sights. We are telling our true story, but can it affect the outcome?

    The thing is with this “secretary/ certifying officer for MERS”
    on a temporary basis mind you, I bet their job is temporary too, if their company gets caught. The little bug of a big guy isn’t going to take responsibility. The company is still responsible. They are committing fraud, no?

    I have to give all of you who are taking these guys on, because this is by far the hardest thing I have done.

  31. Smallz said:

    Also, it is revealing when carefully examining “foreclosure documents” filed with recorders offices statewide (CA) to find that the “assistant secretaries” and “vice presidents” do plenty of “double dipping” and “pencil whipping”. Meaning, endorsing for 2-parties (MERS, RECONTRUST aka Countrywide) on the same foreclosure on the same day!

    They also do this when substituting (or, as in my case, “reconstituting”) trustees, making on-record assignments (what a novel idea), and signing off on the notice of sale.

    A woman named Jill Arnold signed all three of the above documents in my case as “assistant secretary” for BAC, MERS, and Recontrust, respectively. Perhaps if an “assistant secretary” of any of these companies is monitoring this site, please chime in and let us know how that doesn’t violate RICO.

  32. To zurenarrh,
    I thank you very much!

  33. Re: Principal Place of Business

    The following are addresses from the MERS forum–don’t know how current they are:

    The principal place of business for MERS is:

    1595 Spring Hill Road, Suite 310 Vienna, VA 22182

    Please note that the address to which service-of-process should be sent is:

    P.O. Box 2026
    Flint, MI 48501-2026

  34. Oh sorry, my question to anyone who knows

    I have MERS included in my complaint, but have not yet made any motion. I have deposition request for admissions, etc. Does anyone have a good address for this, I thought I had one, and now I cannot seem to find. I have a fax that I will use also.

    And does anyone have an opinion on standing and timing?
    I am claiming Jurisdiction and Standing. I have also a civil suit on this Lender, but now, I am addressing their foreclosure claim. I am involved in a Preliminary stage (with no lawyer) and I have been asked by the Judge to do discovery and interrogatories and depositions. I am so afraid my timing may be off, so I am afraid to file a motion.

    I have a rescinded loan, and the the Lender, after compliance date sent letter agreeing. They never released the security on the home though, and it has not budged either way since. That was June 07. I don;t know what is in the heart, or rather the mind of the Judge, but Rescission did not hold much of any weight. Opposing party said ‘well, you never gave us the money once we rescinded.

    Stupid me, I said to the Judge, that isn’t the way it works. He replied, well you have to owe somebody. I said very little but looked as if I disagreed. Which of course I do. Hmm. that the steps are not following the law as I read it. Don’t know the appropriate protocol.

    Also I mentioned “standing” and I think got over looked. but maybe not, cause it all feels like a well wrapped present. I just fear my timing and possible lateness. I am driving the Staff in chambers crazy. Did not file a motion for extension . but I continued the work and turned into the attorney I did contact him and the Judge to say I was late but working expeditiously and with great diligence, at my best. I had had a death in the family so it was tough.

    I am completely terrified when it comes to the rules of the court. I am so afraid to do things wrong. No one anywhere with regard to the area in NJ but in the Judicial System, why can’t there be an unbiased and not being vocal with advocacy but help with basics. It is heavily out weighed in favour of the Plaintiff in a foreclosure case, any really, where the Defendant can’t afford an attorney.

    1. Does anyone have a good address for MERS?

    2. Anyone know suggest, timing. I am afraid I will lose my chance.

    they have not joined a party, but I feel it should happen. The Lender who had had it the day or 2 before MERS filed foreclosure, and then assignment.

    There is a whole lot more, and I have found several, like 7 parties in addtion to what I knew about.

    Does one have to add this party and file preliminary injunction, and for dismissal based on jurisdiction and standing to start?

    I agree with JLSemidey on the lengthy stay MERS has had, but I think they are like on GIANT party together, and they one makes money they all make money. they trade off and pass through and buy and sell and hmm, probably write it all off just before they foreclose and then sell again. I also have a strong belief regarding double and triple sales into Pools, tell me, how does one swim in one pool and another at the same time, not to mention a third?

    This case is very good news for all those chasing their dream as the Mortgage company tries to run off with it.
    And guys, I know they just sort of breezed right over all the foreclosures, after the money went out by the billions. Everyone gets a break, except the person who actually loses by theft sometimes. The politicians, the Banks, the many who go free. It really is hard to believe, but we are quickly dismissed as parasites. Lets face it, the news has been very busy, If we are not old news, we were barely ever news, but what happens when millions more lose, as those unable to find jobs and ARM loans ready to go again right? How will all these people live, where will everyone go? all these empty houses and people moving in to their cars?

  35. I have my own story to share with regard to MERS

    I had seen this case posted, also another really interesting post re Securities, and one that really made me go hunting.
    I will post the story hopefully I will win.

    This case below I found also very interesting and inspiring.

    Thanx to Neil for sharing all of this

  36. Also, it is revealing when carefully examining “foreclosure documents” filed with recorders offices statewide (CA) to find that the “assistant secretaries” and “vice presidents” do plenty of “double dipping” and “pencil whipping”. Meaning, endorsing for 2-parties (MERS, RECONTRUST aka Countrywide) on the same foreclosure on the same day!

    And it gets better, these so called “vice presidents” and “assistant secretaries” are endorsing “under penalty of perjury” to have participated in courthouse auctions they didn’t even attended or announce!!!

    (((shaking my head))) You can’t make this shit up folks!

    The fraud and perjury should be equal to the amount of money the Fed and Treasury had to print to cover wall streets sins.

    Not to worry, the FDIC is good for it.

  37. Maybe the Snowball is finally starting to roll down the hill.

  38. I always thought TWO for the price of ONE was a GOOD thing.
    Everybody’s talking about the Kansas Appellate Decision?
    What about this one from Arkansas’s Supreme Court?
    Same issues, MERS and “black letter law” ….
    MERS **Lost** and the Arkansas Supreme Court
    cited the Landmark v KESLER Kansas Decision.



    No. 08-1299


    2009 Ark. LEXIS 121

    March 19, 2009, Opinion Delivered



    SUBSEQUENT HISTORY: Rehearing denied by Mortgage Elec. Registration Sys. v. Southwest Homes of Ark., Inc., 2009 Ark. LEXIS 458 (Ark., Apr. 23, 2009)




    COUNSEL: George Nicholas Arnold – Counsel for the Appellant.

    Howard Keith Morrison – Counsel for the Appellant.

    Thomas D. Stockland – Counsel for the Appellee.

    JUDGES: JIM HANNAH, Chief Justice. IMBER, DANIELSON and WILLS, JJ., concur.



    JIM HANNAH, Chief Justice

    Mortgage Electronic Registration System, Inc. (”MERS”) appeals a decision of the Benton County Circuit Court denying its motion to set aside a decree of foreclosure and to dismiss the foreclosure action. 1 MERS alleges that the circuit court erred in ordering foreclosure because as the holder of legal title it was a necessary party that was never served. We affirm the circuit court and hold that under the recorded deed of trust in this case, James C. East, as trustee under the deed of trust, held legal title. Because MERS was at most the mere agent of the lender Pulaski Mortgage Company, Inc., it held no property interest and was not a necessary party. As this case presents an issue of first impression, our jurisdiction is pursuant to Arkansas Supreme Court Rule 1-2(b)(1).

    1 Mortgage Electronic Registration System, Inc.’s (”MERS”) motion was [*2] entitled Motion to Set Aside Default Judgment; however, the circuit court found, and the parties agree, that MERS was never served. Because MERS was never served, it could not have failed to respond to that service and suffer a default judgment. The relief sought was that the decree of foreclosure be set aside and the foreclosure action be dismissed.

    This case arises from foreclosure on a 2006 mortgage granted in a one-acre lot. A prior deed of trust also encumbered the property. In 2003, Jason Paul Lindsey and Julie Ann Lindsey entered into a deed of trust on a one-acre lot in Benton County to secure a promissory note. The lender on that deed of trust was Pulaski Mortgage, the trustee was James C. East, and the borrowers were the Lindseys. MERS was listed on the deed of trust as the “Beneficiary” acting “solely as nominee for Lender,” and “Lender’s successors and assigns.” The second page of the deed of trust states that “the Borrower understands and agrees that MERS holds only legal title to the interests granted by the Borrower and further that MERS as nominee of the Lender has the right to exercise all rights of the Lender including foreclosure.” The deed of trust was recorded.

    In [*3] 2006, the Lindseys granted the subject mortgage on the same property to Southwest Homes of Arkansas, Inc. to secure a second promissory note. This mortgage was recorded. On February 9, 2007, Southwest Homes filed a Petition for Foreclosure in Rem against the Lindseys under the 2006 mortgage. The Lindseys, the Benton County Tax Collector, and “Mortgage Electronic Registration System, Inc. (Pulaski Mortgage Company)” were listed as respondents. Pulaski Mortgage was served; however, MERS was never served. Pulaski Mortgage did not file an answer. 2 A Decree of Foreclosure in Rem was entered on April 4, 2007, and the property was auctioned to Southwest. An Order Approving and Confirming Commissioner’s Sale was entered on May 8, 2007. In February 2008, MERS learned of the foreclosure and moved for relief, arguing it was a necessary party to the foreclosure action. The circuit court denied the motion, and this appeal followed.

    2 Pulaski Mortgage was the lender of record. No assignment of the deed of trust was recorded nor had Pulaski Mortgage’s security interest been satisfied of record.

    MERS asserts that it held legal title to the property and, therefore, it was a necessary party to any action [*4] regarding title to the property. The deed of trust indicates that MERS holds legal title and is the beneficiary, as well as the nominee of the lender. It further purports by contractual agreement with the borrower to grant MERS the power to “exercise any and all rights” of the lender, including the right of foreclosure. However the deed of trust provides that all payments are to be made to the lender, that the lender makes decisions on late payments, and that all rights to foreclosure are held by the lender.

    No payments on the underlying debt were ever made to MERS. MERS did not service the loan in any way. It did not oversee payments, delinquency of payments, or administration of the loan in any way. Instead, MERS asserts to be a corporation providing electronic tracking of ownership interests in residential real property security instruments. See In re MERSCORP, Inc. v. Romaine, 8 N.Y.3d 90, 861 N.E.2d 81, 828 N.Y.S.2d 266 (2006). According to MERS, it was developed by the “real estate finance industry” and was designed to facilitate the sale and resale of instruments in “the secondary mortgage market, which include one of the government sponsored entities.”

    MERS contracts with lenders to track security [*5] instruments in return for an annual fee. MERSCORP, supra. Those who contract with MERS are referred to by MERS as “MERS members.” According to MERS, MERS members contractually agree to appoint MERS as their common agent for all security instruments registered with MERS. 3 MERS asserts that it holds the authority to exercise the rights of the lender, and for that purpose, it holds bare legal title. Thus, it is alleged that a principal-agent relationship existed between MERS and Pulaski Mortgage under the contract terms of the deed of trust. 4

    3 The Kansas Court of Appeals, in Lankmark National Bank v. Kesler, 40 Kan. App. 2d 325, 192 P.3d 177 (2008), likewise found that Mortgage Electronic Registration System, Inc. acts as an agent. We note the analysis in this case is consistent with our own but also note that the Kansas Supreme Court granted review of the Landmark case.

    4 MERS is listed as a nominee on the deed of trust. A nominee is “a person designated to act on behalf of another, usu. in a very limited way.” Black’s Law Dictionary 1076 (8th ed. 2004). A nominee is also a “person who holds bare legal title for the benefit of others or who receives and distributes funds for the benefit [*6] of others.” Id. As discussed above, MERS was not designated to act on behalf of another under the facts of this case. Further, it held no title in this case where title vested in the trustee, and finally, it received and distributed no funds for the benefit of others.

    “An agent is a person who, by agreement with another called the principal, acts for the principal and is subject to his control.” Taylor v. Gill, 326 Ark. 1040, 1044, 934 S.W.2d 919, 922 (1996) (quoting AMI 3d 701 (1989)). Thus, MERS, by the terms of the deed of trust, and its own stated purposes, was the lender’s agent, including not only Pulaski Mortgage but also any successors and assigns.

    MERS asserts authority to act, arguing that once it becomes the agent on a security instrument, it remains so for every MERS member lender who acquires ownership. This authority is alleged to arise from the contractual relationship between MERS and MERS members. Thus, MERS argues it may act to preserve the rights of the lender regardless of who the lender may be under the MERS electronic registration. We specifically reject the notion that MERS may act on its own, independent of the direction of the specific lender who holds the repayment [*7] interest in the security instrument at the time MERS purports to act. “[A]n agent is authorized to do, and to do only, what it is reasonable for him to infer that the principal desires him to do in the light of the principal’s manifestation and the facts as he knows or should know them at the time he acts.” Hot Stuff, Inc. v. Kinko’s Graphic Corp., 50 Ark. App. 56, 59, 901 S.W.2d 854, 856 (1995) (citing Restatement (Second) of Agency § 33 (1958)). Nothing in the record shows that MERS had authority to act. Here, Pulaski Mortgage was the lender and MERS’s principal. Pulaski Mortgage was a named party in the foreclosure action. Thus, MERS was not acting as the lender’s agent at the time it moved to set aside the decree of foreclosure.

    However, MERS also argues that it holds a property interest through holding legal title. Specifically, it purports to hold legal title with respect to the rights conveyed by the borrower to the lender. We disagree.

    “A deed of trust is ‘a deed conveying title to real property to a trustee as security until the grantor repays a loan.’” First United Bank v. Phase II, Edgewater Addition, 347 Ark. 879, 894, 69 S.W.3d 33, 44 (2001)(quoting Black’s Law Dictionary [*8] 773 (7th ed. 1999)); see also House v. Long, 244 Ark. 718, 426 S.W.2d 814 (1968). The encumbrance created by the deed of trust may be described as a lien. See, e.g., First Amer. Nat’l Bank of Nashville v. Booth, 270 Ark. 702, 606 S.W. 2d 70 (1980).

    Under a deed of trust, the borrower conveys legal title in the property by a deed of trust to the trustee. Phase II, supra. “In this state, the naked legal title to real property included in a mortgage passes to the mortgagee, or to the trustee in a deed of trust, to make the security available for the payment of the debt.” Harris v. Collins, 202 Ark. 445, 447, 150 S.W.2d 749, 750 (1941). The trustee is limited in use of the title to passing title back to the grantor/borrower in the case of payment, or to the lender in the event of foreclosure. See Forman v. Holloway, 122 Ark. 341,183 S.W. 763 (1916). The lender holds the indebtedness and is the beneficiary of the deed of trust. House, supra. A trustee under a deed of trust is not a true trustee. Heritage Oaks Partners v. First Amer. Title, Ins. Co., 155 Cal. App. 4th 339, 66 Cal. Rptr.3d 510 (Cal. Ct. App. 2007). Under a deed of trust, the trustee’s duties are limited to (1) upon default undertaking foreclosure [*9] and (2) upon satisfaction of the debt to reconvey the deed of trust. Id.

    In the present case, all the required parties to a deed of trust under Arkansas law are present, the borrower in the Lindseys, the Lender in Pulaski Mortgage, and the trustee in James C. East. Under a deed of trust in Arkansas, title is conveyed to the trustee. Harris, supra. MERS is not the trustee. Here, the deed of trust renamed James C. East as the trustee. The deed of trust did not convey title to MERS. Further, MERS is not the beneficiary, even though it is so designated in the deed of trust. Pulaski Mortgage, as the lender on the deed of trust, was the beneficiary. It receives the payments on the debt.

    The cases cited by MERS only confirm that MERS could not obtain legal title under the deed of trust. MERS relies on Hannah v. Carrington, 18 Ark. 85 (1856); however, that case stands for the proposition that a deed of trust vests legal tide in the trustee. We are also cited to Shinn v. Kitchens, 208 Ark. 321, 326, 186 S.W.2d 168, 171 (1945), where this court stated that “[t]he trustee named in the deeds of trust was a necessary party at the institution of the foreclosure suit, as also, of course, was Kitchens, [*10] the holder of the indebtedness.” East, as trustee, was a necessary party. MERS was not. Finally, we are cited to Beloate v. New England Securities Co., 165 Ark. 571, 575,265 S.W. 83 (1924), where this court stated that the real owner of the debt, as well as the trustee in the mortgage, are necessary parties in the action to recover the debt and foreclose the mortgage. Again, this case supports the conclusion that East was a necessary party and MERS was not.

    Further, under Arkansas foreclosure law, a deed of trust is defined as “a deed conveying real property in trust to secure the performance of an obligation of the grantor or any other person named in the deed to a beneficiary and conferring upon the trustee a power of sale for breach of an obligation of the grantor contained in the deed of trust.” Ark. Code Ann. § 18-50-101(2) (Repl. 2003). Thus, under the statutes, and under the common law noted above, a deed of trust grants to the trustee the powers MERS purports to hold. Those powers were held by East as trustee. Those powers were not conveyed to MERS.

    MERS holds no authority to act as an agent and holds no property interest in the mortgaged land. It is not a necessary party. In [*11] this dispute over foreclosure on the subject real property under the mortgage and the deed of trust, complete relief may be granted whether or not MERS is a party. MERS has no interest to protect. It simply was not a necessary party. See Ark. R. Civ. P. 19(a). MERS’s role in this transaction casts no light on the contractual issues on appeal in this case. See, e.g., Wilmans v. Sears, Roebuck & Co., 355 Ark. 668, 144 S.W.3d 245 (2004).

    Finally, we note that Arkansas is a recording state. Notice of transactions in real property is provided by recording. See Ark. Code Ann. § 14-15-404 (Supp. 2007). Southwest is entitled to rely upon what is filed of record. In the present case, MERS was at best the agent of the lender. The only recorded document provides notice that Pulaski Mortgage is the lender and, therefore, MERS’s principal. MERS asserts Pulaski Mortgage is not its principal. Yet no other lender recorded its interest as an assignee of Pulaski Mortgage. Permitting an agent such as MERS purports to be to step in and act without a recorded lender directing its action would wreak havoc on notice in this state.


    IMBER, DANIELSON and WILLS, JJ., concur.




    PAUL E. DANIELSON, Associate Justice

    I concur that the circuit court’s order should be affirmed, but write solely because I view the decisive issue to be whether MERS was, pursuant to Arkansas Rule of Civil Procedure 19(a) (2008), a necessary party to the foreclosure action. It can generally be said that “[n]ecessary parties to a foreclosure action are parties whose interest are inseparable such that a court would be unable to determine the rights of one party without affecting the rights of another.” 59A C.J.S. Mortgages § 708 (2008). See also 55 Am. Jur. 2d Mortgages § 647 (2008) (”[A]ll persons who are beneficially interested, either in the estate mortgaged or the demand secured, are proper or necessary parties to a suit to foreclose.”). Moreover, “[p]ersons having no interest are neither necessary nor proper parties, and the mere fact that they were parties to transactions out of which the mortgage arose does not give them such an interest as to make them necessary parties to an action to foreclose the mortgage.” Id. Indeed, our rules of civil procedure contemplate the same.

    Rule 19(a) of the Arkansas Rules of Civil Procedure speaks to necessary parties:

    (a) Persons to Be [*13] Joined if Feasible. A person who is subject to service of process shall be joined as a party in the action if (1) in his absence complete relief cannot be accorded among those already parties, or, (2) he claims an interest relating to the subject of the action and is so situated that the disposition of the action in his absence may (i) as a practical matter, impair or impede his ability to protect that interest, or, (ii) leave any of the persons already parties subject to a substantial risk of incurring double, multiple or otherwise inconsistent obligations by reason of his claimed interest. If he has not been joined, the court shall order that he be made a party. If he should join as a plaintiff, but refuses to do so, he may be made a defendant; or, in a proper case, an involuntary plaintiff.

    Ark. R. Civ. P. 19(a) (2008).

    Here, a review of the deed of trust for the subject property reveals four parties to the deed: (1) Jason Paul Lindsey and Julie Ann Lindsey, “Borrower”; (2) James C. East, “Trustee”; (3) MERS, “(solely as nominee for Lender, as hereinafter defined, and Lender’s successors and assigns)”; and (4) Pulaski Mortgage Company, “Lender.” The question, then, is whether MERS, [*14] as nominee, was a necessary party that had an interest “so situated that the disposition of the action in [its] absence may” have impaired its ability to protect its interest or left a subsequent purchaser or other subject to a substantial risk by reason of its interest. The answer is no; MERS, as nominee, was not a necessary party to the foreclosure action, because it held no such interest.

    Initially, I must note that my review of the deed’s notice provision reveals that the deed clearly contemplated the Lender as the party with interest, in that it provided:

    13. Notices. . . . Any notice to Lender shall be given by first class mail to Lender’s address stated herein or any address Lender designates by notice to Borrower. Any notice provided for in this Security’ Instrument shall be deemed to have been given to Borrower or Lender when given as in this paragraph.

    Here, as stated in the circuit court’s order of foreclosure. Pulaski Mortgage, as Lender, was served with notice of the foreclosure action, in accord with paragraph thirteen.

    But, in addition, MERS claims that because it holds legal title, it has an interest so as to render it a necessary party pursuant to Rule 19(a). Indeed, pursuant [*15] to the deed of trust, MERS held “only legal title to the interests granted” by the Lindseys,

    but, if necessary to comply with law or custom, MERS, (as nominee for Lender and Lender’s successors and assigns) has the right to exercise any and all of those interests, including, but not limited to, the right to foreclose and sell the Property; and to take any action required of Lender including, but not limited to, releasing and canceling this Security Instrument.

    “Legal title” is defined as “[a] title that evidences apparent ownership but does not necessarily signify full and complete title or a beneficial interest.” Black’s Law Dictionary 1523 (8th ed. 2004) (emphasis added). Thus, as evidenced by the definition, holding legal title alone in no way demonstrates the interest required by Rule 19(a).

    MERS further claims that its status as nominee is evidence of its interest in the property, making it a necessary party. However, merely serving as nominee was recently held by one court to be insufficient to demonstrate an interest rising to the level to be a necessary party. In Landmark National Bank v. Kesler, 40 Kan. App. 2d 325, 192 P.3d 177 (2008), review granted, (Feb. 11, 2009). MERS also [*16] asserted that it was a necessary party to the foreclosure suit at issue. There, the district court found that MERS was not a necessary party, and the appellate court affirmed. Just as here, MERS was a party to the mortgage “solely as nominee for Lender.” 40 Kan. App. 2d at 327, 192 P.3d at 179. Based on that status, the Kansas court found that MERS was in essence, an agent for the lender, as its right to act to enforce the mortgage was strictly limited. See id.

    Agreeing with MERS that a foreclosure judgment could be set aside for failure to join a “contingently necessary party,” the Kansas court observed that a party was “contingently necessary” under K.S.A. 60-219 if “the party claims an interest in the property at issue and the party is so situated that resolution of the lawsuit without that party may ‘as a practical matter substantially impair or impede [its] ability to protect that interest.’” Id. at 328, 192 P.3d at 180 (quoting K.S.A. 60-219). Notably, the language of K.S.A. 60-219 quoted by the Kansas court is practically identical to the language of Ark. R. Civ. P. 19(a).

    The Kansas appellate court noted that MERS received no funds and that the mortgage required the borrower [*17] to pay his monthly payments to the lender. See id. It also observed, just as in the case at hand, that the notice provisions of the mortgage “did not list MERS as an entity to contact upon default or foreclosure.” Id. at 330, 192 P.3d at 181. After declaring that MERS did not have a “sort of substantial rights and interests” that had been found in a prior decision and noting that “a party with no beneficial interest is outside the realm of necessary parties,” the Kansas court concluded that “the failure to name and serve MERS as a defendant in a foreclosure action in which the lender of record has been served” was not such a fatal defect that the foreclosure judgment should be set aside. Id. at 331, 192 P.3d at 181-82.

    It is my opinion that the same holds true in the instant case. Here, Pulaski Mortgage, the lender for whom MERS served as nominee, was served in the foreclosure action. But, further, neither MERS’s holding of legal title, nor its status as nominee, demonstrates any interest that would have rendered it a necessary party pursuant to Ark. R. Civ. P. 19(a). For these reasons, I concur that the circuit court’s order should be affirmed.

    IMBER and WILLS, JJ., join.

  39. MERS was created solely to help facilitate the fraud these banks and lenders committed upon us all. As such, they deserve to be sued off the planet.

  40. Why doesn’t someone do something about the lying pretender lenders’ lawyers?

  41. So if some one has had their home foreclosed, they moved out, the home has been sold to another poor soul out there. That person could bring an action against MERS, and all the other “Crooks” and sue them for damages, including the bankruptcy attorney that cleaned them up before being kicked out of their homes?

    Thanks again for making this crystal clear!

    The title agents, and their insurers are also a potential party as well.

    How could this MERS fiasco go for so long without ever being challenged as it is bieng done today? When you read their guidelines and see how they are acting all over the place, you realize how much of a “W.H.O.R.E.” they have been so far, how many people across the country pose as their vice president, secretaries, etc. It is all crooked!

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