Anthony Bucci v. Lehman Brothers Bank, FSB
2013 R.I. LEXIS 52
| R.I. | 2013Background
- Bucci loan funded May 15, 2007; note payable to Lehman Brothers and mortgage naming MERS as nominee for lender; MERS holds legal title as mortgagee while note owner is beneficial owner; default occurred October 2008; MERS initiated foreclosure; Buccis sought declaratory and injunctive relief to stop foreclosures; Superior Court held MERS could foreclose under mortgage language and statute; Rhode Island law recognizes title theory and MERS as nominee authorized to foreclose.
- Plaintiffs argued MERS lacked agency/contractual basis to foreclose and that §34-11-22 and §34-11-21 require the mortgagee to be the note holder; argued statutory schemes foreclose only when the note holder and mortgagee are the same entity; contended MERS’s nominee status violated statutory provisions.
- Defendants argued the mortgage expressly grants MERS the Statutory Power of Sale and foreclose on behalf of the note owner; asserted agency/nominee relationship between MERS and note owner exists; contended statutory framework permits such foreclosure.
- The trial court found MERS had contractual authority and statutory authority to foreclose, and implied agency relationship existed; judgment for defendants; plaintiff appeal on multiple grounds including mootness.
- Court proceeded to decide whether MERS may foreclose as nominee; held that MERS is mortgagee and may foreclose as agent for note owner; rejected literal-only reading of statutes; affirmed Superior Court judgment; case not moot.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Can MERS foreclose under the mortgage’s statutory power of sale? | Bucci argues MERS, as nominee, cannot foreclose since not the note holder. | Lehman/MERS held the right to foreclose via mortgage language granting MERS power. | Yes; mortgage language grants MERS power of sale. |
| Is there an agency relationship between MERS and the note owner? | Plaintiffs contend no agency between MERS and note holder. | Affirmed agency via MERSCORP agreement and Marchant affidavit; parties waived dispute. | Agency relation exists; MERS may act for note owner. |
| Does §34-11-22 permit MERS to foreclose as mortgagee? | Statute confines mortgagee to holder of the note; MERS only nominee. | Statute regulates manner of foreclosure; does not require same entity to hold note. | Yes; statute allows foreclosure by mortgagee acting as nominee. |
| Must the mortgagee and note holder be the same entity under §34-11-21? | Unity of note holder and mortgagee required; MERS violates this. | Agency/ownership structure compatible; statutory language not so read. | No; MERS may foreclose as agent of the note owner. |
| Is the case moot after changes in servicer/lender? | MERS policy change and changes in servicer render case moot. | MERS remains mortgagee and issues remain justiciable. | Not moot; issues still ripe for decision. |
Key Cases Cited
- Eaton v. Federal National Mortgage Association, 969 N.E.2d 1118 (Mass. 2012) (MERS foreclose as agent; agency principles apply to mortgage foreclosures)
- Jackson v. Mortgage Electronic Registration Systems, Inc., 770 N.W.2d 487 (Minn. 2009) (explains MERS system and transfer mechanics)
- Mortgage Electronic Registration Systems, Inc. v. Romaine, 861 N.E.2d 81 (N.Y. 2006) (describes MERS as nominee and efficiency in transfers)
- Thurber v. Carpenter, 18 R.I. 782 (1895) (power of sale as matter of contract)
- Gorman v. St. Raphael Academy, 853 A.2d 28 (R.I. 2004) (limits on public policy; contract enforcement in Rhode Island)