Sterling Fiduciaries LLC v. JPMorgan Chase Bank NA
372 P.3d 741
Utah Ct. App.2016Background
- In 2007 the McRaes executed a $900,000 promissory note secured by a recorded trust deed naming MERS as beneficiary "as nominee" for the lender and successors; the deed stated the note could be sold without notice to borrower.
- TBW transferred the note and servicing to various parties; MERS tracked transfers in its database but no county record of those transfers to purchasers (including Chase) existed before 2012.
- The McRaes sued to quiet title against TBW (and "any other person claiming an interest"); TBW defaulted and the district court entered default judgment against TBW in December 2011 (recorded Jan. 2012).
- The McRaes quitclaimed the property to Sterling in September 2011; Sterling alleges the default judgment and the quitclaim extinguished any unrecorded interests such as Chase’s.
- Chase later obtained the note and servicing, and MERS assigned the trust deed to Chase (recorded Feb. 2013); Chase moved for summary judgment asserting the default judgment did not quiet Chase’s interest and Sterling had constructive notice.
- The district court granted summary judgment for Chase; the appellate court affirmed, holding the default judgment only quieted title as to TBW and that Sterling was not a bona fide purchaser because of constructive notice of MERS/Chase.
Issues
| Issue | Plaintiff's Argument (Sterling) | Defendant's Argument (Chase) | Held |
|---|---|---|---|
| Whether default judgment against TBW extinguished Chase’s interest | Default judgment and subsequent quitclaim to Sterling voided any TBW-related interest and cut off unrecorded claims | Default judgment named and bound only TBW; MERS/Chase had recorded interest and were not unknown parties | Default judgment quieted title only as to TBW; it did not extinguish Chase’s or MERS’s interests |
| Whether Sterling is a bona fide purchaser entitled to prevail over Chase’s unrecorded interest | Sterling paid value and recorded first; thus unrecorded later assignment to Chase is void against Sterling | Sterling had constructive (record and inquiry) notice via the recorded trust deed naming MERS as nominee, so Sterling lacked good-faith purchaser status | Sterling was not a bona fide purchaser because the recorded trust deed gave constructive notice of MERS/Chase; Sterling cannot defeat Chase’s interest |
Key Cases Cited
- Commonwealth Prop. Advocates, LLC v. Mortgage Elec. Registration Sys., Inc., 680 F.3d 1194 (10th Cir. 2011) (upholding MERS’s beneficial/nominee role and that parties can contract for a nominee to act on successors’ behalf)
- Cervantes v. Countrywide Home Loans, Inc., 656 F.3d 1034 (9th Cir. 2011) (explaining MERS’s role as nominal record holder to facilitate securitization and avoid repeated county recordings)
- Delo v. GMAC Mortgage, LLC, 302 P.3d 658 (Ariz. Ct. App. 2013) (holding that where MERS is identified in the deed a diligent search must include giving MERS notice; MERS has a right to notice)