Argued and submitted on January 8, 2013.
On review from the Court of Appeals. CC CV10020001, CA A147430, [*]
Gregory A. Chaimov, Davis Wright Tremaine LLP, Portland, argued the cause for petitioner on review Mortgage Electronic Registration Systems, Inc. With him on the brief were Frederick B. Burnside and Kevin H. Kono.
W. Jeffrey Barnes, pro hac vice, W. J. Barnes, PA, Beverly Hills, argued the cause for respondent on review. With him on the brief was Elizabeth Lemoine, Makler Lemoine & Goldberg, PC, Portland.
Hope A. Del Carlo, Portland, filed a brief on behalf of amicus curiae Oregon Trial Lawyers Association.
Rolf C. Moan, Assistant Attorney General, Salem, filed a brief on behalf of amicus curiae State of Oregon.
This is the second of two cases this court decides today that is concerned with the nonjudicial foreclosure of trust deeds under the Oregon Trust Deed Act (OTDA) and the mortgage finance industry's practice of naming the Mortgage Electronic Recording System, Inc., (MERS), rather than the lender, as a trust deed's "beneficiary." In Brandrup v. ReconTrust Co., __ Or __, ___ P.3d ___(June 6, 2013), we answered questions certified to us by a United States District Court about whether and how that practice comports with the OTDA's nonjudicial foreclosure requirements. In the present case, we apply our answers in Brandrup to a dispute that comes to this court through a petition for review of a decision of the Court of Appeals.
The underlying case is an action for declaratory and injunctive relief, brought by a home loan borrower against MERS and other entities that were attempting to utilize the OTDA's "advertisement and sale" procedure, ORS 86.710, to foreclose the trust deed that secured her promise to repay. Plaintiff argued that, although the trust deed identified MERS as the beneficiary of the trust deed, neither MERS nor any of the other entities involved in the foreclosure had any legal or beneficial interest in the trust deed that would allow them to proceed under the OTDA. The trial court granted summary judgment to defendants, but the Court of Appeals reversed that decision, holding that a genuine issue of material fact existed as to whether all of the requirements for nonjudicial foreclosure set out in the OTDA had been satisfied. Niday v. GMAC Mortgage, LLC, 251 Or.App. 278, 300, 284 P.3d 1157 (2012). We also conclude that a genuine issue of material fact exists, albeit a different one than the one the Court of Appeals identified.
Our analysis in this case relies heavily on our answers in Brandrup to the federal court's certified questions, and the reader would be well-advised to review our opinion in that case before delving into the present opinion. Of particular importance is the general discussion of mortgage loans and trust deeds, recordation requirements, and the OTDA that precedes the discussion of the certified questions. Brandrup, Or at (slip op at 4-13). Because that portion of the Brandrup opinion covers most of the necessary ground, we limit the background discussion in the present case to a brief description of MERS and its function in the home mortgage business.
MERS and its parent company, MERSCorp, were created in the 1990's in response to a sharp increase in trading in mortgage loans that resulted from a developing secondary market for mortgage-backed securities. In an effort to make that market more efficient, companies that were involved in making and trading in mortgage loans, including the Federal National Mortgage Association (Fannie Mae) and the Federal Home Loan Mortgage Corporation (Freddie Mac), combined to create MERS. See, generally, R. K. Arnold, "Yes, There is Life on MERS, " 11 Prob & Prop 33, 34 (1997). MERS operates a national electronic database, the MERS System, which privately tracks transfers of ownership interests and servicing rights in mortgage loans among the lenders, investors, and other companies that are its members.
The present case examines the MERS arrangement in the specific context of the OTDA. The OTDA allows for nonjudicial foreclosure of a particular kind of security instrument, a trust deed. A trust deed conveys an interest in real property -- a lien -- to a trustee, who holds that interest, in trust, to secure an obligation owed by the "grantor" of the trust deed to the trust deed's "beneficiary." ORS 86.705(2), (4), (7).
Under the OTDA, if the grantor defaults on his or her obligation to the beneficiary (by, for example, failing to repay a loan made by the beneficiary), the trustee may foreclose the trust deed by "advertisement and sale" of the trust property, if certain prerequisites are satisfied. ORS 86.710, ORS 86.735. Among the listed prerequisites is a requirement that
"the trust deed, any assignments of the trust deed by the trustee or the beneficiary and any appointment of a successor trustee [be] recorded in the mortgage records in the counties in which the property described in the deed is situated[.]"
II. FACTS AND PROCEDURAL HISTORY
With that background in mind, we turn to the facts of the present case. In 2006, plaintiff obtained a loan from Greenpoint Mortgage Funding, Inc. to finance the purchase of a home in Clackamas County, memorializing her promise to repay the loan, with interest, in an "adjustable rate note." The note expressly stated that the note might be transferred from "Lender" (Greenpoint) to a different "Note Holder." Along with the note, plaintiff executed a "Deed of Trust" that (1) identified MERS as the trust deed's beneficiary, but solely as "nominee for lender"; and (2) conveyed an interest in the property plaintiff had purchased to a named trustee, to secure the promise of repayment memorialized in the note and other related promises. Specifically, the trust deed provided:
"The beneficiary of the Security Instrument is MERS (solely as nominee for Lender and Lender's successors and assigns) and the successors and assigns of MERS. This Security Instrument secures to Lender: (i) the repayment of the Loan, and all renewals, extensions and modifications of the Note; and (ii) the performance of Borrower's covenants and agreements under this security Instrument and the Note. For this purpose, Borrower irrevocably grants and conveys to Trustee, in trust, with power of sale [the property plaintiff had financed], together with all the improvements now or hereafter erected on the property * * *. 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 Lender including, but not limited to, releasing and canceling this Security Instrument."
In a separate definition section, the trust deed identified plaintiff as "Borrower, " Greenpoint as "Lender, " First American Title Insurance Co. as "Trustee, " and MERS as "the beneficiary under this Security Instrument." The trust deed provided that, although "Borrower" would be notified in writing of any change in the entity collecting payments due under the note, "the note or a partial interest in the note (together with this Security Instrument) c[ould] be ...