Washington Supreme Court Rules on MERS’ Role As Beneficiary
MERS cannot be
beneficiary in WA
On August 16, 2012,the Washington State Supreme Court issued its decision in the consolidated case of Bain v. Metropolitan Mortgage Group, Inc. et al, 86206-1 (Wash. Aug. 16, 2012). The appeal arose out of two cases in which homeowners sought injunctions to stop pending foreclosures as well as damages under Washington’s Consumer Protection Act (CPA). Three questions were certified to the Court on appeal:
- Is Mortgage Electronic Registration Systems, Inc. a lawful “beneficiary” within the terms of Washington’s Deed of Trust Act (RCW 61.24.005(2)), if it never held the promissory note secured by the deeds of trust?
- If so, what is the legal effect of MERS acting as an unlawful beneficiary under the terms of Washington’s Deed of Trust Act?
- Does a homeowner possess a cause of action under Washington’s Consumer Protection Act (CPA) against MERS if MERS acts as an unlawful beneficiary under the terms of Washington’s Deed of Trust Act?
As to the first question, the Court found that MERS was unable to be a beneficiary under the plain language of Washington’s Deed of Trust Act. Specifically, the Court ruled that because MERS never held the instrument or document evidencing the obligations secured by the deed of trust (i.e. the Note), it could not meet the statutory definition of “beneficiary” as set forth in the Deed of Trust Act. In so finding, the Court specifically rejected MERS’ argument that it should be considered the beneficiary under the contracted terms of the deed of trust and pursuant to agency principals.
Finally, in light of its determination regarding MERS’ inability to be a “beneficiary” under the Deed of Trust Act, the Court ruled that homeowners may have a cause of action against MERS under Washington’s CPA. While not making a finding that MERS characterizing itself as the beneficiary is per se deceptive under the CPA, the Court indicated that for purposes of answering the question before it, it would presumptively find such practice to be deceptive. The Court further found, however, that the legitimacy of a homeowner’s CPA claim must be determined on a case-by-case basis in light of the specific facts of each case and that homeowners will have to prove injury and a causation to prevail on such a claim.
Despite this finding, the Court declined to answer the second question. Instead, the Court acknowledged that the record in front of it was insufficient for it to issue a ruling as to the legal effect of MERS acting as an unlawful beneficiary.