Reeves v. Recontrust Co., N.A.
846 F. Supp. 2d 1149
D. Or.2012Background
- On August 15, 2007, Reeves executed a Note and Deed of Trust with Mortgage Express, secured by property in West Linn, Oregon, with MERS named as nominal beneficiary and as nominee for lender and successors.
- The Deed of Trust was recorded August 22, 2007 in Clackamas County.
- On January 13, 2010, MERS assigned its beneficial interest to BAC Home Loans Servicing, LP, with the assignment recorded in Clackamas County.
- Also on January 13, 2010, BAC executed an Appointment of Successor Trustee appointing ReconTrust as successor trustee, recorded in Clackamas County.
- ReconTrust recorded a Notice of Default on January 13, 2010 citing default beginning October 1, 2009 and foreclosing on May 24, 2010; later, a rescission of the notice of default was recorded May 28, 2010.
- Plaintiff Reeves filed suit in state court on September 11, 2011 alleging wrongful foreclosure and related claims; Defendants removed to federal court and moved to dismiss.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether MERS could validly act as beneficiary to support foreclose | MERS was not a proper beneficiary; assignment invalid, severing DOT from Note | MERS is a valid beneficiary; powers exist to foreclose | MERS properly designated as beneficiary; foreclosure authority valid |
| Whether BAC/BofA had standing to foreclose | BOA lacked ownership of the loan despite servicing role | Record shows transfer of beneficial interest to BOA; standing exists | BOA had standing to proceed with nonjudicial foreclosure |
| Whether unrecorded assignments defeat foreclosure | Unrecorded transfers sever the DOT from the Note, violating ORS 86.735(1) | Recording statutes require recording by trustee/beneficiary; not every transfer must be recorded | Unrecorded transfers do not invalidate the trust deed where authority remained with the holder; no error in foreclosure |
| Whether ReconTrust as successor trustee was valid | ReconTrust lacked valid appointment by MERS/BAC; invalid successor | ReconTrust validly appointed and recorded | ReconTrust valid successor trustee; foreclosure proper |
| Whether notice of default/election to sell complied with ORS 86.745 and rescission effects | Notice defective or rescinded waiver of pre-May 28 default | Rescission did not waive or cure default; notice did not violate statutory requirements | Defendants complied; Fifth Claim dismissed; notice issues resolved in favor of defendants |
Key Cases Cited
- Cervantes v. Countrywide Home Loans, Inc., 656 F.3d 1034 (9th Cir. 2011) (MERS as beneficiary; foreclose authority depends on rightful beneficiary status)
- Beyer v. Bank of America, 800 F.Supp.2d 1157 (D. Or. 2011) (reaffirmed MERS as beneficiary and authority to foreclose under Oregon law)
- James v. ReconTrust Co., No. 11-CV-324-ST, 2011 WL 3841558 (D. Or. 2011) (Magistrate Stewart rejected theory that unrecorded assignments invalidate foreclosure; trust deed follows the note)
- Merten v. Portland Gen. Elec. Co., 234 Or.App. 407 (Or. App. 2010) (Elements of fraud in Oregon; reliance standards (cited for general fraud framework))
- Barringer v. Loder, 47 Or. 223 (1905) (note security interest follows the note; early authority on recording requirements)
- Intri-Plex Tech., Inc. v. Crest Group, Inc., 499 F.3d 1048 (9th Cir. 2007) (when ruling on 12(b)(6), consider pleadings, exhibits, and judicially noticed documents)
- Swartz v. KPMG LLP, 476 F.3d 756 (9th Cir. 2007) (court may consider writings referenced in complaint if authenticity unquestioned)