Bain v. Metropolitan Mortgage Group, Inc.
285 P.3d 34
Wash.2012Background
- MERS was created in the 1990s to track ownership of mortgage debt via a private electronic registry, enabling cheaper, faster transfers and securitization.
- In Washington, MERS is frequently named as beneficiary of deeds of trust that secure home loans, a role traditionally held by the lender.
- Washington's Deed of Trust Act defines 'beneficiary' as the holder of the instrument evidencing the secured obligation, not someone who merely holds a security interest.
- Two King County foreclosures involved MERS as beneficiary informing delinquencies and appointing trustees to foreclose; note assignments were not publicly recorded.
- The federal court certified three state-law questions to the Washington Supreme Court about MERS's status as beneficiary and related CPA claims, prompting this decision.
- The court addresses whether MERS can be a lawful beneficiary without holding the promissory note, the legal effect if not, and whether homeowners can pursue CPA claims against MERS.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Is MERS a lawful beneficiary if it never held the note? | Selkowitz argues MERS cannot be beneficiary without holding the note. | MERS contends broader definitions and contract-based interpretations support beneficiary status. | No; plain statutory text defines beneficiary as noteholder. |
| What is the legal effect if MERS is an unlawful beneficiary? | Selkowitz proposes rescission or assignment to the noteholder to cure the defect. | MERS urges a straightforward remedy or assignment, depending on who holds the note. | Not resolved on the record; court declines to answer. |
| Can a homeowner have a CPA claim against MERS if MERS is an unlawful beneficiary? | Bain contends MERS's status as beneficiary misrepresents the transaction and harms homeowners. | MERS argues no CPA claim arises from mere beneficiary designation without injury. | Yes, but only if the homeowner proves elements; deception presumed under current record. |
Key Cases Cited
- Cox v. Helenius, 103 Wn.2d 383 (1985) (trustee has fiduciary duties to borrower and beneficiary)
- Udall v. T.D. Escrow Servs., Inc., 159 Wn.2d 903 (2007) (debt/foreclosure process should favor borrowers)
- State v. Morley, 134 Wn.2d 588 (1998) (interpretation of boilerplate statutory language within statutory context)
- Hangman Ridge Training Stables, Inc. v. Safeco Title Ins. Co., 105 Wn.2d 778 (1986) (deceptive practices in CPA reviewing standard)
- Ralph Williams’ Nw. Chrysler Plymouth, Inc. v. State, 87 Wn.2d 298 (1976) (CPA elements and public interest discussed)