Niday v. GMAC Mortgage, LLC , 353 Or. 648 ( 2013 )

648 June 6, 2013 No. 26
IN THE SUPREME COURT OF THE
STATE OF OREGON
Rebecca NIDAY,
fka Rebecca Lewis,
Respondent on Review,
v.
GMAC MORTGAGE, LLC,
a foreign limited liability company;
and Executive Trustee Services, Inc.,
a California corporation,
Defendants-Respondents,
and
MORTGAGE ELECTRONIC
REGISTRATION SYSTEMS, INC.,
a Delaware corporation,
Petitioner on Review.
(CC CV10020001; CA A147430; SC S060655)
En Banc
On review from the Court of Appeals.*
Argued and submitted January 8, 2013.
Gregory A. Chaimov, Davis Wright Tremaine LLP,
Portland, argued the cause for petitioner on review Mortgage
Electronic Registration Systems, Inc. With him on the brief
were Frederick B. Burnside and Kevin H. Kono.
W. Jeffrey Barnes, pro hac vice, W. J. Barnes, PA, Beverly
Hills, argued the cause for respondent on review. With him
on the brief was Elizabeth Lemoine, Makler Lemoine &
Goldberg, PC, Portland.
Hope A. Del Carlo, Portland, filed a brief on behalf of
amicus curiae Oregon Trial Lawyers Association.
Rolf C. Moan, Assistant Attorney General, Salem, filed a
brief on behalf of amicus curiae State of Oregon.
______________
*  Appeal from Clackamas County Circuit Court, Henry C. Breithaupt, Judge.
251 Or App 278, 284 P3d 1157 (2012).
Cite as 353 Or 648 (2013) 649
BREWER, J.
The decision of the Court of Appeals is affirmed. The
judgment of the circuit court is reversed, and the case is
remanded to that court for further proceedings.
Kistler, J., concurred in part and specially concurred in
part and wrote an opinion in which Balmer, C. J., joined.
Plaintiff, a home loan borrower, brought an action for declaratory and injunctive
relief against the Mortgage Electronic Registration System, Inc. (MERS) and other
entities that were attempting to utilize the “advertisement and sale” procedures
of the Oregon Trust Deed Act (OTDA), ORS 86.705 to ORS 86.795, to foreclose
the trust deed that secured her promise to repay her home loan. Plaintiff argued
that, although the trust deed identified MERS as the “beneficiary” of the trust
deed, neither MERS nor any of the other defendants had any apparent legal or
beneficial interest in the trust deed that would allow them to foreclose under the
OTDA. Plaintiff also argued that, insofar as the true beneficiary apparently had
transferred its interest in the promissory note underpinning the trust deed to
another entity without recording an assignment of the trust deed in the relevant
county land records, a statutory prerequisite for foreclosure under the ORS
86.735(1)—that “any assignments of the trust deed by *  * the beneficiary *  *
*  *
[be] recorded”—had not been satisfied. Defendants moved for summary judgment,
arguing that plaintiff’s arguments failed because MERS in fact was the trust deed’s
“beneficiary” within the meaning of the OTDA. The trial court agreed and granted
defendant’s motion. On plaintiff’s appeal, the Court of Appeals reversed, holding
that MERS was not the trust deed’s “beneficiary,” and that there was a genuine
issue of fact as to whether the prerequisite at ORS 86.735(1) had been satisfied (i.e.,
as to whether the true beneficiary had assigned the trust deed without recording
the assignment). Held: (1) MERS was not the trust deed’s beneficiary within the
meaning of the OTDA; (2) the recording prerequisite at ORS 86.735(1) applied
only to formal, written assignments capable of recordation in their own right, and
therefore did not apply to the original true beneficiary’s apparent transfer of its
interest in the promissory note that the trust deed secured; (3) MERS did not have
authority to initiate or direct nonjudicial foreclosure of the trust deed as the trust
deed’s “beneficiary; and (4) an issue of fact remained as to whether MERS had
authority to initiate or direct nonjudicial foreclosure of the trust deed as the true
beneficiary’s agent.
The decision of the Court of Appeals is affirmed. The judgment of the circuit
court is reversed, and the case is remanded to that court for further proceedings.
650 Niday v. GMAC Mortgage, LLC
BREWER, J.
This is the second of two cases this court decides
today that is concerned with the nonjudicial foreclosure
of trust deeds under the Oregon Trust Deed Act (OTDA)
and the mortgage finance industry’s practice of naming
the Mortgage Electronic Recording System, Inc., (MERS),
rather than the lender, as a trust deed’s “beneficiary.” In
Brandrup v. ReconTrust Co., 353 Or 668, ___ P3d ___ (2013),
we answered questions certified to us by a United States
District Court about whether and how that practice comports
with the OTDA’s nonjudicial foreclosure requirements. In
the present case, we apply our answers in Brandrup to a
dispute that comes to this court through a petition for
review of a decision of the Court of Appeals.
The underlying case is an action for declaratory and
injunctive relief, brought by a home loan borrower against
MERS and other entities that were attempting to utilize the
OTDA’s “advertisement and sale” procedure, ORS 86.710, to
foreclose the trust deed that secured her promise to repay.
Plaintiff argued that, although the trust deed identified
MERS as the beneficiary of the trust deed, neither MERS
nor any of the other entities involved in the foreclosure had
any legal or beneficial interest in the trust deed that would
allow them to proceed under the OTDA. The trial court
granted summary judgment to defendants, but the Court of
Appeals reversed that decision, holding that a genuine issue
of material fact existed as to whether all of the requirements
for nonjudicial foreclosure set out in the OTDA had been
satisfied. Niday v. GMAC Mortgage, LLC, 251 Or App 278,
300, 284 P3d 1157 (2012). We also conclude that a genuine
issue of material fact exists, albeit a different one than the
one the Court of Appeals identified.
I. BACKGROUND
Our analysis in this case relies heavily on our
answers in Brandrup to the federal court’s certified
questions, and the reader would be well-advised to review
our opinion in that case before delving into the present
opinion. Of particular importance is the general discussion of
mortgage loans and trust deeds, recordation requirements,
and the OTDA that precedes the discussion of the certified
Cite as 353 Or 648 (2013) 651
questions. Brandrup, 353 Or at 675-82. Because that portion
of the Brandrup opinion covers most of the necessary
ground, we limit the background discussion in the present
case to a brief description of MERS and its function in the
home mortgage business.
MERS and its parent company, MERSCorp, were
created in the 1990’s in response to a sharp increase in
trading in mortgage loans that resulted from a developing
secondary market for mortgage-backed securities. In an
effort to make that market more efficient, companies that
were involved in making and trading in mortgage loans,
including the Federal National Mortgage Association (Fannie
Mae) and the Federal Home Loan Mortgage Corporation
(Freddie Mac), combined to create MERS. See, generally,
R. K. Arnold, “Yes, There is Life on MERS,” 11 Prob & Prop
33, 34 (1997). MERS operates a national electronic database,
the MERS System, which privately tracks transfers of
ownership interests and servicing rights in mortgage loans
among the lenders, investors, and other companies that are
its members.
The present case examines the MERS arrangement
in the specific context of the OTDA. The OTDA allows for
nonjudicial foreclosure of a particular kind of security
instrument, a trust deed. A trust deed conveys an interest in
real property—a lien—to a trustee, who holds that interest,
in trust, to secure an obligation owed by the “grantor” of the
trust deed to the trust deed’s “beneficiary.” ORS 86.705(2),
(4), (7). Under the OTDA, if the grantor defaults on his or
her obligation to the beneficiary (by, for example, failing
to repay a loan made by the beneficiary), the trustee may
foreclose the trust deed by “advertisement and sale” of the
trust property, if certain prerequisites are satisfied. ORS
86.710, ORS 86.735. Among the listed prerequisites is a
requirement that
“the trust deed, any assignments of the trust deed by
the trustee or the beneficiary and any appointment of a
successor trustee [be] recorded in the mortgage records in
the counties in which the property described in the deed is
situated[.]”
ORS 86.735(1).
652 Niday v. GMAC Mortgage, LLC
II.  FACTS AND PROCEDURAL HISTORY
With that background in mind, we turn to the facts
of the present case. In 2006, plaintiff obtained a loan from
Greenpoint Mortgage Funding, Inc. to finance the purchase
of a home in Clackamas County, memorializing her promise
to repay the loan, with interest, in an “adjustable rate note.”
The note expressly stated that the note might be transferred
from “Lender” (Greenpoint) to a different “Note Holder.”
Along with the note, plaintiff executed a “Deed of Trust”
that (1) identified MERS as the trust deed’s beneficiary, but
solely as “nominee for lender”; and (2) conveyed an interest
in the property plaintiff had purchased to a named trustee,
to secure the promise of repayment memorialized in the
note and other related promises. Specifically, the trust deed
provided:
“The beneficiary of the Security Instrument is MERS
(solely as nominee for Lender and Lender’s successors and
assigns) and the successors and assigns of MERS. This
Security Instrument secures to Lender: (i) the repayment of
the Loan, and all renewals, extensions and modifications of
the Note; and (ii) the performance of Borrower’s covenants
and agreements under this security Instrument and
the Note. For this purpose, Borrower irrevocably grants
and conveys to Trustee, in trust, with power of sale [the
property plaintiff had financed], together with all the
improvements now or hereafter erected on the property
*  *. Borrower understands and agrees that MERS holds
*
only legal title to the interests granted by Borrower in this
Security Instrument, but, if necessary to comply with law
or custom, MERS (as nominee for Lender and Lender’s
successors and assigns) has the right: to exercise any or all
of those interests, including, but not limited to, the right
to foreclose and sell the property, and to take any action
required of Lender including, but not limited to, releasing
and canceling this Security Instrument.”
In a separate definition section, the trust deed identified
plaintiff as “Borrower,” Greenpoint as “Lender,” First
American Title Insurance Co. as “Trustee,” and MERS as
“the beneficiary under this Security Instrument.” The trust
deed provided that, although “Borrower” would be notified
in writing of any change in the entity collecting payments
due under the note, “the note or a partial interest in the note
Cite as 353 Or 648 (2013) 653
(together with this Security Instrument) c[ould] be sold one
or more times without prior notice to borrower.”
The trust deed was recorded in the Clackamas
County real property records within a few days after its
execution. Shortly thereafter, plaintiff received notice that
the servicing rights to her loan had been transferred to
GMAC Mortgage, LLC (GMACM). Plaintiff thereafter made
her payments to GMACM. At some point, plaintiff allegedly
ceased to make payments.
In April 2009, plaintiff received a “Trustee’s Notice
of Sale” from Executive Trustee Services (ETS), which
purported to be acting as agent for the trustee.1 The notice
referred to the trust deed that plaintiff had signed and
stated that, as provided in ORS 86.735, “the beneficiary
[MERS] and the trustee” had elected to sell the property
identified in the trust deed (i.e., plaintiff’s home), at a
specified place and time, to satisfy the obligation secured by
the trust deed. Plaintiff wrote to ETS, demanding that the
scheduled sale be cancelled. In her letter, plaintiff pointed
out that the loan had been originated by Greenpoint, that
she had never been advised of any assignment of the trust
deed to MERS, ETS, or GMACM, that there was no record of
any such assignment, and that it thus appeared to her that
the trustee’s sale had been instituted by a party or parties
that had no rights in either the note or the trust deed and,
therefore, had no authority to nonjudicially foreclose. The
letter ended by demanding copies of various documents
relating to the trust deed, including documents establishing
the “entire chain of title to the Deed of Trust and note.”
Plaintiff did not hear back from ETS, but the trustee’s sale
was rescheduled for a later date.
Before the rescheduled sale occurred, plaintiff filed
this action for injunctive and declaratory relief, naming
MERS, GMACM, and ETS as defendants. In her complaint,
plaintiff described the events outlined above, and further
alleged that
1
ETS purports to be the agent of the current trustee, LSI Title Company of
Oregon, LLC. The parties generally refer to ETS as the trustee and, hereinafter, for
the sake of simplicity, we do so as well.
654 Niday v. GMAC Mortgage, LLC
“plaintiff has never been provided with any Assignment
or other document demonstrating the transfer of the full
and unencumbered interest in both the Note and the Deed
of Trust from the original lender *  * to any person or
*
entity * * * and has no knowledge how defendant MERS or
defendant ETS ever acquired any legal rights under the
Note and Deed of Trust sufficient to institute foreclosure
proceedings.”
Plaintiff sought to enjoin the scheduled sale on the ground
that defendants had failed to demonstrate that they had
a legal interest in the trust deed or the underlying note
that would entitle them to foreclose. Plaintiff also sought
declarations that (1) defendants did not have the necessary
legal or equitable interests in either the note or the deed of
trust to institute a foreclosure under the OTDA; (2) there
had been no lawful assignment of the deed of trust “from the
original lender to any of the defendants;” and (3) defendant’s
attempt to foreclose by advertisement and sale was “legally
defective and precluded from enforcement.”
Defendants filed a motion for summary judgment,
asserting it was “indisputable” that plaintiff had defaulted
on her loan and that ETS and GMACM were proper parties
to initiate the foreclosure. With respect to the latter point,
defendants asserted that MERS was “the beneficiary of the
Deed of Trust, as nominee of the original lender’s assignee,
Aurora Bank”; that ETS was the agent of the “duly appointed
successor” to the original trustee; and that GMACM received
the right to “service” the loan from the original lender and,
under its servicing agreement with the new owner of the
loan, Aurora Bank,2 GMACM was authorized to initiate
foreclosure on Aurora Bank’s behalf.3 Defendants attached
an affidavit by a GMACM employee and certain other
materials in support of those assertions. Plaintiff responded
that defendants’ evidence was insufficient because it
failed to show that (1) MERS had a beneficial interest in
2
Aurora Bank, the reputed owner of the note, is not a party to this action.
3
ORS 86A.175 authorizes certain entities to “service or collect” mortgage
loans “with the permission of the lender, note owner, note holder or other holder
of an interest in a note.” For purposes of that statute, “service[ing] or collect[ing]”
includes “exercising contractual, statutory or common law remedies, such as *  * *
judicial or nonjudicial foreclosure.” ORS 86A.175(3)(e)(C).
Cite as 353 Or 648 (2013) 655
the property that would allow it to initiate foreclosure or
to assign or transfer any interest in the property to other
defendants; or (2) GMACM or ETS had obtained an interest
in the trust deed by means of valid assignments or transfers
that would allow them to foreclose.
At the hearing on the summary judgment motion,
the parties’ arguments shifted away from a general debate
about the sufficiency of MERS’ and the other defendants’
“interests” in the note and trust deed and toward a more
specific statutory question—whether the precondition that
“any assignments of the trust deed by the beneficiary * * * [be]
recorded in the mortgage records of the [relevant] county,”
ORS 86.735(1),4 had been satisfied. Defendants argued
that, insofar as the beneficiary originally named in the
trust deed remained the beneficiary at the time foreclosure
proceedings were initiated, there were no “assignments of
the trust deed by the beneficiary” to record. Plaintiff argued
that MERS was not the “beneficiary” within the meaning
of ORS 86.735(1) and that there was reason to believe that
the true beneficiary, Greenpoint, had assigned the trust
deed, because a party who was a stranger to the original
transaction was trying to foreclose. According to plaintiff,
the assignee’s failure to record that or any subsequent
assignment raised a factual question as to whether a
precondition of nonjudicial foreclosure had been satisfied.
The trial court granted defendant’s motion for
summary judgment. The court concluded that MERS was
the trust deed’s beneficiary, and it also appeared to conclude
that ETS was a lawfully appointed trustee that was
authorized to foreclose under ORS 86.735 if the statutory
requirements were satisfied. The court further concluded
that, insofar as there was no evidence of any assignment of
the trust deed by ETS or MERS, there was no triable issue
of fact with respect to the contention that defendants had
failed to satisfy the recording requirement in ORS 86.835(1).
Plaintiff appealed, arguing that the summary
judgment record contained evidence that Greenpoint, and
not MERS, was the trust deed’s original “beneficiary,” and
4
ORS 86.735(1) is set out in its entirety above, 353 Or at 651.
656 Niday v. GMAC Mortgage, LLC
that Greenpoint had transferred its interest in the trust
deed without recording the transfer. Plaintiff argued that,
in light of that evidence, questions of fact remained as to
(1) whether MERS or the other defendants had a sufficient
interest in the trust deed to initiate foreclosure under the
OTDA, and (2) whether the recording requirement in ORS
86.735(1) had been satisfied.5
The Court of Appeals reversed. Niday, 251 Or App
at 301. After examining the definition of “beneficiary” in
ORS 86.705(2) in the context of the surrounding statutes
and case law, it concluded that, regardless of the trust
deed’s designation of MERS as “the beneficiary under this
Security Instrument,” Greenpoint, the lender whose right
to repayment the trust deed secured, was, at inception, the
trust deed’s “beneficiary” for purposes of the OTDA. Id.
at 298-99. After observing that there was evidence in the
summary judgment record that Greenpoint had transferred
its interest in the promissory note, and that, under this
court’s cases, a mortgage (or trust deed) is transferred by
operation of law when the note it secures is transferred, the
court considered whether such a transfer of the promissory
note would constitute an “assignment[  of the trust deed”
]
for purposes of the statutory requirement at ORS 86.735(1).
Id. at 299-300.
The Court of Appeals rejected defendants’
contention that the statutory term “assignments” refers
only to formal, written assignments that are capable of
recordation in their own right. It held that the evidence
that Greenpoint had transferred the note created a genuine
issue of material fact as to whether ORS 86.735(1) had been
satisfied. Id. Notably, the Court of Appeals did not address
plaintiff’s other argument for enjoining, and declaring
invalid, the contemplated foreclosure—that MERS and the
other defendants had no legal or equitable interest in the
trust deed that would permit them to initiate foreclosure
under the OTDA.
5
The latter point was raised in the Court of Appeals by amicus curiae Oregon
Trial Lawyers Association (OTLA). The Court of Appeals rejected defendants’
contention that that argument had not been preserved in the trial court, and gave
plaintiffs the benefit of OTLA’s argument. 251 Or App at 293 n 11, 300 n 15.
Cite as 353 Or 648 (2013) 657
III.  DOES A GENUINE ISSUE OF FACT REMAIN
AS TO WHETHER THE OTDA’S RECORDING
REQUIREMENT, ORS 86.735(1), WAS SATISFIED?
Before this court, defendants argue that, contrary
to the Court of Appeals’ decision, there is no evidence in
the summary judgment record that creates a triable issue
of fact as to whether a “beneficiary” of the trust deed made
an “assignment” of the trust deed within the meaning of
the recording requirement in ORS 86.735(1). Defendants
begin with the Court of Appeals’ rejection of MERS’s status
as “beneficiary.” They argue that MERS can be, and is,
the “beneficiary” of the trust deed at issue, by virtue of its
designation as such in the trust deed.
Defendants rely on the OTDA’s definition of the
term, at ORS 86.705(2):
“As used in ORS 86.705 to 86.795:
“* * * * *
“(2)  ‘Beneficiary’ means a person named or otherwise
designated in a trust deed as the person for whose benefit a
trust deed is given, or the person’s successor in interest, and
who is not the trustee unless the beneficiary is qualified to
be a trustee under ORS 86.790(1)(d).”
Defendants contend that the phrase “named or otherwise
designated” shows that the legislature intended that the
parties to a trust deed have the ability to contractually
identify the “beneficiary” without regard to whom the trust
deed actually benefits. Defendants posit that the definition
must be read consistently with “long established Oregon
statutory and common law principles authorizing agents
*  * to act as beneficiary and hold legal and record title to
*
interests in real estate.” In other words, defendants argue,
the “named or otherwise designated” wording shows that
the legislature intended to permit the lender (who usually
is “the person for whose benefit the trust deed is given”) to
designate its agent or nominee as the trust deed’s beneficiary.
This court rejected all of those arguments, and others
like it, in Brandrup, 353 Or at 682-89. In Brandrup, we noted
that a proposed interpretation of the definition of the word
“beneficiary” in ORS 86.705(2) that is virtually identical to
658 Niday v. GMAC Mortgage, LLC
the one that defendants now offer failed to account for a
significant portion of the definition’s words, which focused
on the beneficiary’s function in the trust deed arrangement
as “the person for whose benefit the trust deed is given.”
We reasoned that, to give all of the words of the definition
their intended meaning, it was necessary to conclude that,
in addition to being the person “for whose benefit the trust
deed is given,” the beneficiary must be “named or otherwise
designated” as such in the trust deed. Id. at 684. We
observed that, in a typical trust deed transaction where the
obligation that is secured by the trust deed is memorialized
in a promissory note, the “beneficiary” would be the person
who is entitled to repayment of the note obligation, that is,
either the lender or the lender’s successor in interest. Id. at
661-62. Finally, we concluded that, although a lawful agent
might have authority to act on the true beneficiary’s behalf
with respect to the trust deed, and might even appear on
documents in the beneficiary’s stead, such an agent “cannot
become the ‘beneficiary’ for purposes of [the] statutory
requirement [set out at ORS 86.735(1), which] is defined, in
part, by the status of the ‘beneficiary.’ ” Id. at 666.
In the trust deed at issue here, MERS is “named” as
the beneficiary (“The beneficiary of the Security Instrument
is MERS (solely as nominee for Lender and Lender’s
successors and assigns and the successors and assigns of
MERS)[.]”). But MERS is not “the person for whose benefit
the trust deed is given.” Rather, the terms of the trust deed
“designate” the “Lender” (Greenpoint) as that person (“This
Security Instrument secures to Lender: (i) the repayment of
the Loan, and all renewals, extensions and modifications of
the Note; and (ii) the performance of Borrower’s covenants
and agreements under this security Instrument and the
Note.”). Thus, for purposes of the requirement for nonjudicial
foreclosure that “any assignments of the trust deed by the
*  * beneficiary” be recorded, the “beneficiary” of the trust
*
deed is Greenpoint or its successors, and not MERS.
Defendants argue, however, that even if “naming”
MERS as the beneficiary in the trust deed is not sufficient,
by itself, to make it so, the fact remains that the trust deed
conveys to MERS the right to exercise “all” of the beneficial
owner’s interests under the trust deed (as the beneficial
Cite as 353 Or 648 (2013) 659
owner’s agent) if that should become necessary to qualify
MERS as the trust deed’s beneficiary. Defendants refer to
the following provision in the trust deed:
“Borrower understands and agrees that MERS holds only
legal title to the interests granted by Borrower in this
Security Instrument, but, if necessary to comply with law
or custom, MERS (as nominee for Lender and Lender’s
successors and assigns) has the right: to exercise any or all
of those interests, including, but not limited to, the right
to foreclose and sell the property, and to take any action
required of Lender including, but not limited to, releasing
and canceling this Security Instrument.”
(Emphasis added.) Anticipating an argument that the trust
deed beneficiary must have a right to receive repayment of
the loan obligation that the trust deed secures, defendants
contend that the foregoing provision conveys to MERS, “if
necessary to comply with law or custom,” a right to receive
payment of the loan obligations on behalf of the lender or
noteholder.
But the right to “receive” payment on a note “on
behalf of” a principal is distinct from the right to repayment
on one’s own behalf. As discussed above, it is the latter
right that defines a trust deed “beneficiary” in the ordinary
trust deed transaction. 353 Or at 658 (the beneficiary is the
person “entitled to repayment of the note obligation”). Thus,
as this court observed in Brandrup, with respect to identical
wording in the trust deeds at issue in that case, “[u]nless the
*  * provision transforms MERS into [the person to whom
*
the obligation that the trust deed secures is owed], it cannot
transform MERS into the ‘beneficiary’ of the trust deed.”
Brandrup, 353 Or at 692.
As broad as the “law or custom” provision appears
to be, it is not broad enough to convey that particular right.
As this court explained in Brandrup:
“The provision first states that MERS holds ‘only legal
title to the interests granted by Borrower in this Security
Instrument.’ When the provision thereafter states that
MERS has the right ‘to exercise any or all of those interests,’
if necessary to comply with law or custom, it refers to
the interests ‘granted by the borrower in this security
instrument.’ ”
660 Niday v. GMAC Mortgage, LLC
Id. at 692 (emphasis in original). But the only interests
that are granted by a borrower in a trust deed are a legal
interest in the real property that the trust deed burdens and
that legal interest’s beneficial counterpart. Thus, the “law
or custom” provision cannot convey to MERS the right that
would qualify it as the trust deed’s beneficiary—the right
to repayment of the obligation that the trust deed secures.
It follows that, regardless of MERS’ designation as such in
the trust deed, and regardless of wording in the trust deed
that purports to grant MERS various “interests” belonging
to the lender “if necessary to comply with law or custom,”
MERS cannot be the beneficiary of the trust deed in this
case. Rather, insofar as the trust deed “secures to Lender”
the “repayment of the Loan” and other covenants relating
to that obligation, the lender (Greenpoint) was the original
“beneficiary” of the trust deed for purposes of the OTDA.
The Court of Appeals did not err in so holding. Niday, 251
Or App at 298-99.
Defendants argue that, in any event, the Court of
Appeals erred in concluding that an issue of fact existed
with respect to whether there had been any “assignment[  ]
of the trust deed” by Greenpoint that triggered the recording
requirement in ORS 86.735(1). In so holding, the Court of
Appeals relied on (1) evidence that the promissory note
secured by the trust deed had been transferred, and (2) the
legal premise that a trust deed is “assigned” by operation
of law when the underlying promissory note is transferred.
Niday, 251 Or App at 299. But defendants contend that,
when, as a prerequisite to nonjudicial foreclosure, the
legislature adopted the requirement in ORS 86.835(1)
that “any assignments of the trust deed by the trustee
or the beneficiary” be recorded, it did not intend that
“assignments” include transfers of a promissory note that
result in an equitable transfer of the associated trust deed
by operation of law. To the contrary, defendants argue, the
legislature intended to require recordation only of formal,
written assignments of the trust deed.
Again, this is an issue that was discussed and decided
in Brandrup, but this time, Brandrup supports defendants’
interpretation of the statutory phrase. In Brandrup, this
court concluded that the phrase “any assignments” was not,
Cite as 353 Or 648 (2013) 661
itself, dispositive. We noted that ORS 86.735(1)—and the
very concept of recordation—assumes the existence of an
assignment in recordable form, i.e., a written document that
is separate from the note and that describes the burdened
property. We acknowledged that parties to the transfer of a
promissory note can always memorialize the transaction in
a separate writing that is recordable, but we observed that
ORS 86.735(1) does not express any requirement that that
be done. Brandrup, 353 Or at 696-97.
We noted, further, that ORS 86.735(1) bears a
resemblance to a statute that was in effect when the OTDA
was enacted in 1959 that provided, in part, that “every
assignment of mortgage shall be recorded,” former ORS
86.070 (1959).6 This court had interpreted that statute
in Barringer v. Loder, 47 Or 223, 224-28, 81 P 778 (1905),
as recognizing that a mortgage could be transferred by
indorsement of the associated promissory note, but as only
requiring the recording of those assignments of mortgage
that were “in writing, executed and acknowledged with the
same formality as required in deeds and mortgages of real
property.” We concluded in Brandrup that the legislature
likely had former ORS 86.070 (1959) in mind when it adopted
similar wording in ORS 86.735(1), and that it intended to
assign a similar, narrow meaning to the term “assignment”
in the latter statute. Brandrup, 353 Or at 698-99. We
concluded, in other words, that in providing that a trustee
may nonjudicially foreclose only if “any assignments of the
trust deed by the trustee or beneficiary *  * are recorded,”
*
ORS 86.735(1) refers to written assignments of a trust deed
in recordable form, and not to assignments of trust deeds
that result by operation of law by transfer of the note.
According to that understanding, although the
Court of Appeals correctly observed that there is evidence
in the summary judgment record that the trust deed’s
beneficiary, Greenpoint, sold the promissory note associated
with the trust deed, that transaction does not qualify as an
“assignment[ ] of the trust deed” for purposes of the recording
requirement of ORS 86.735(1). Neither is there evidence in
the summary judgment record of any “assignment” of the
6
Former ORS 86.070 was repealed in 1965. Or Laws 1965, ch 252, § 1.
662 Niday v. GMAC Mortgage, LLC
trust deed in the intended sense, that is, a formal, written
assignment of the trust deed, itself. Thus, on the question
of whether defendants violated ORS 86.735(1) by initiating
foreclosure when Greenpoint sold the promissory note but
did not record an assignment of the trust deed, there is no
issue of material fact.
IV.  DOES A GENUINE ISSUE OF FACT REMAIN?
That leaves us to consider whether a genuine issue
of material fact exists that is pertinent to plaintiff’s original
challenge to the scheduled foreclosure sale—that none of
defendants possessed a qualifying legal interest in the trust
deed or note that would allow them to initiate foreclosure
under the OTDA. That challenge is based on plaintiff ’s
allegations that she had received a “Trustee’s Notice of
Sale” that referred to ETS as the trustee of the trust deed
and MERS as its beneficiary, that, in spite of the trust deed’s
designation of MERS, the original beneficiary was the
lender, and that plaintiff had no knowledge or information
as to whether or how any of defendants had acquired any
legal rights in the note and trust deed that were sufficient
to institute foreclosure proceedings.
In support of their motion for summary judgment,
defendants submitted (1) copies of the promissory note
and trust deed; (2) an affidavit by an employee of the loan
servicer (GMACM) describing what defendants believed
were the relevant transactions; (3) a report from the MERS
database showing the same transactions; and (4) a copy of
MERS’s appointment of ETS as a successor to the original
trustee, showing that the appointment had been recorded
in the county land records.7 Defendants asserted that that
evidence established that
“GMACM, as the holder of the original note and servicer
of plaintiff’s loan, properly initiated the foreclosure of
the Deed of Trust on behalf of MERS, the beneficiary of
7
In the hearing, defendants apparently produced the original promissory
note. It is unclear from the record what, if anything, the note showed about the
person entitled to enforce the note or, if different, the owner of the note. We know
that GMACM claimed to be “holding” the note in its capacity as servicer of the
loan, and that GMACM did not claim to own the note or to act on its own behalf in
the foreclosure proceeding. There is no evidence in the record as to whether or how
the note had been transferred to GMACM.
Cite as 353 Or 648 (2013) 663
the Deed of Trust as the nominee of the original lender’s
assignee, Aurora Bank. LSI [(ETS’s principal)], the duly
appointed successor trustee, properly executed the non-
judicial foreclosure.”
Plaintiff responded that defendants’ evidence relied on the
legitimacy of MERS’s status as the trust deed’s beneficiary.
Plaintiff insisted that MERS was not the trust deed’s
beneficiary, but a mere nominee of the beneficiary, and that
it therefore lacked authority not only to foreclose, but also
to assign interests in the trust deed or underlying note
to others. Plaintiff also pointed to defendants’ failure to
produce, in response to her demands, any document showing
that MERS or ETS had acquired interests in the note and
trust deed that would entitle them to nonjudicially foreclose.
Because the trial court did not include any
explanation of its decision in its written order, its reasons
for granting summary judgment for defendants must be
discerned from its comments during the summary judgment
hearing. Those comments suggest, on the one hand, that the
court accepted MERS’s designation as beneficiary in the
trust deed as conclusive evidence of that status, and thus
concluded that no triable issue of fact existed with respect
to MERS’s authority to initiate (or, specifically, to direct the
trustee to initiate) a nonjudicial foreclosure proceeding. But
the trial court also suggested that the question of whether
the trustee was acting on behalf of a lawful beneficiary was
a matter between the trustee and the beneficiary, not one
that the borrower could assert to derail a foreclosure under
the statute. At any rate, the court appeared to conclude
that defendants’ evidence established ETS’s authority, as a
validly appointed successor to the original trustee, to direct
or participate in a nonjudicial foreclosure proceeding under
ORS 86.735. The Court of Appeals’ opinion did not address
either of those apparent conclusions or the broader question
of whether defendants had interests in the note and trust
deed that would authorize them to proceed with foreclosure
under the statute. We now turn to those issues.
We begin with the trial court’s apparent conclusion
that the summary judgment record conclusively established
that MERS was the beneficiary of the trust deed and, thus,
664 Niday v. GMAC Mortgage, LLC
was entitled to initiate a foreclosure proceeding. That
determination appears to rest entirely on the fact that the
trust deed, which was recorded in the pertinent real property
records, identified MERS as its “beneficiary.”
However, as discussed above, 353 Or at 658-60,
and in Brandrup, 353 Or at 682-93, the fact that MERS
was identified in the trust deed as the “beneficiary” does
not make it so for purposes of the OTDA. Rather, the
“beneficiary” is the person to whom the obligation that
the trust deed secures is owed, Brandrup, 353 Or at 689,
in this case, either the lender or its successor. As noted
above, 353 Or at 660, under that meaning, MERS is not the
trust deed’s beneficiary. MERS therefore cannot claim any
authority, as the trust deed’s beneficiary, to initiate or direct
the nonjudicial foreclosure of a trust deed.
Still, as this court recognized in Brandrup, 353 Or
at 705-09, even if MERS lacks authority to act as the trust
deed’s beneficiary, it may have authority to act on behalf of
the beneficiary if it can demonstrate that it has an agency
relationship with the beneficiary and that the agency
agreement is sufficiently expansive. Although in Brandrup
we discussed that possibility in connection with the issue
of MERS’ authority to assign a trust deed, it would seem
to apply equally to the present issue of MERS’s authority
to foreclose the trust deed. In either case, MERS’ authority
to act as the beneficiary’s agent depends on who succeeded
to the lender’s rights, whether those persons manifested
consent that MERS act on their behalf and subject to their
control, and whether MERS has agreed to so act. Brandrup,
353 Or at 707 (citing Hampton Tree Farms, Inc. v. Jewett,
320 Or 599, 617, 892 P2d 683, 694 (1995)).
Although Brandrup is not a summary judgment
case, it nevertheless is instructive with respect to how
MERS’ status as a trust deed beneficiary’s agent, and the
nature and scope of its authority as an agent, might be
established. In that case, this court rejected the proposition
that MERS’s designation in a trust deed as “nominee for
Lender and Lender’s successors and assigns” established
an agency relationship between MERS and the original
Cite as 353 Or 648 (2013) 665
lender or any successor to the original lender. We did so
primarily because the original lender and its successors
were not signatories to the trust deed. 353 Or at 708-09. We
acknowledged, however, that, depending on its terms, the
much-discussed agreement between MERS and members
might establish MERS’s authority to act as a “common
agent” for the original lender and any successors who are
members of MERS. Brandrup, 353 Or at 689 n 7, 708-09. And,
Brandrup aside, there is always the possibility of a separate
agreement between MERS and a lender’s successors in
interest, authorizing MERS to act as the successors’ agent
in a foreclosure proceeding.
But, as far as we can tell, there is nothing in the
summary judgment record in this case that identifies the
successors to the original lender’s interests or shows that
MERS is authorized, as the agent of the successors to the
original lender’s interests, to initiate or direct a nonjudicial
foreclosure proceeding under the OTDA. There is some
evidence that the current owner of the note is Aurora Bank
and that Aurora Bank is a member of MERS. But there
is no evidence as to whether Aurora Bank is a successor
to the original lender’s interests. Nor is there evidence of
an agency agreement between Aurora Bank and MERS,
or between MERS and its members as a whole, much less
one that authorizes MERS to initiate foreclosures on behalf
of Aurora Bank. Further, there is some suggestion that
GMACM is the “holder” of the note. If the note is negotiable,
it is possible that GMACM is a successor to the original
lender’s interests or that both Aurora Bank and GMACM
share that role; however, neither the record nor the parties’
arguments establish those matters beyond genuine dispute.8
8
The parties have not addressed the identity of the beneficiary if, as we
conclude, it is not MERS. That issue is by no means academic. If a note is negotiable,
the “party entitled to enforce the note” (the “PETE”) under ORS 73.0301 may not
be the same person as the owner of the note, that is, the party entitled to the
economic benefits of the note. Because a mortgage or trust deed follows the note
that it secures, United States Nat. Bank v. Holton, 99 Or 419, 428-29, 195 P 823(1921), the potential separation of ownership and PETE status raises the question
of whether a lender’s successor—that is, the beneficiary—must be the owner, the
PETE, or both? Most courts that have thus far addressed the issue have concluded
that PETE status, not ownership, confers the right to foreclose. See, e.g., Edelstein
v. NY Mellon, 286 P3d 249, 257 (Nev 2012). Because the parties have not addressed
the issue, we do not discuss it further here.
666 Niday v. GMAC Mortgage, LLC
The trial court nevertheless appeared to reason9
that the beneficiary’s authority in a decision to proceed with
nonjudicial foreclosure is immaterial. To the extent that
the court so reasoned, we disagree. On the one hand, it is
true that the trustee, and only the trustee, is authorized
to foreclose a trust deed by advertisement and sale. ORS
86.710, ORS 86.735. However, the OTDA contemplates
that the beneficiary of the trust deed—the original lender
or its successor—is entitled to determine whether and how
to foreclose a trust deed after default. For example, ORS
86.710 expressly provides that the beneficiary can reject the
nonjudicial foreclosure procedure in favor of an ordinary
judicial foreclosure. More importantly, the beneficiary has
absolute authority to appoint a successor trustee at any
time after a trust deed is executed under ORS 86.790(3), an
authority that all but guarantees the beneficiary’s control
over any foreclosure decision.
However, even if the beneficiary’s authority were
immaterial, summary judgment still would be improper in
the present case. That is so because, on the present record,
MERS’ involvement in the appointment of the current
trustee casts doubt on the trustee’s status. The trial court
concluded that ETS was the lawfully appointed trustee (“of
record, we have * * * the chain, if you will, back to the original
trustee First American Title”). The trial court apparently
relied on a document in the summary judgment record
showing that MERS had appointed ETS as successor to the
original trustee, and also showing that the appointment
had been recorded in the Clackamas County real property
records. But, appointments of a successor trustee may only
be made by the trust deed beneficiary, ORS 86.790(3), and, as
discussed, MERS is not, and never has been, the beneficiary
of the trust deed for purposes of the OTDA. In the absence
of evidence in the record showing the identity of the lender’s
successors in interest and that MERS had authority to act
for those successors in interest,10 an issue of fact remains as
9
The court opined that the foreclosure of the trust deed at issue could proceed,
without regard to whether MERS was authorized to act as the trust deed’s
beneficiary, because “we have a trustee and the trustee is foreclosing.”
10
As discussed above, 353 Or at 665, there is nothing in the summary judgment
record that establishes MERS’s authority to act as the agent for anyone.
Cite as 353 Or 648 (2013) 667
to the validity of ETS’s appointment as successor trustee,
and, in consequence, its authority to initiate and pursue
a nonjudicial foreclosure proceeding under the OTDA.11
It follows that the trial court erred in granting summary
judgment to defendants.
The decision of the Court of Appeals is affirmed.
The judgment of the circuit court is reversed, and the case
is remanded to that court for further proceedings.
KISTLER, J., concurring in part and specially
concurring.
For the reasons stated in the opinion concurring
in part and dissenting in part in Brandrup v. ReconTrust
Co., 353 Or 668, ___ P3d ___ (2013), I concur in part in the
majority’s reasoning and in its judgment.
Balmer, C. J., joins in this opinion concurring in
part and specially concurring.
11
This same logic would apply to any contention that GMACM had authority
to direct nonjudicial foreclosure as the servicer of the loan with the lender’s or
note owner’s/holder’s permission to proceed, ORS 86A.175(1), (3)(e)(C). Even
if there were undisputed evidence in the record showing that GMACM had the
required status or authority to direct a nonjudicial foreclosure (and there is not),
the uncertain state of the record with respect to ETS’s status as the trustee still
would preclude summary judgment.