NAKAMOTO, J.
This case, one of first impression in the Oregon appellate courts, involves the intersection between Oregon's nonjudicial foreclosure laws and a creature of more modern vintage: Mortgage Electronic Registration Systems, Inc., also known as MERS. Since 1959, the Oregon Trust Deed Act has authorized the use of trust deeds as security for home loans and allowed foreclosure of a defaulting homeowner's interest by means of a privately-conducted, advertised trustee's sale of the home rather than pursuant to a court-ordered, judicial foreclosure — provided, however, that certain statutory requirements are met. One of those requirements is that "any assignments of the trust deed by the trustee or the beneficiary" must be "recorded in the mortgage records in the counties in which the property described in the deed is situated." ORS 86.735(1).
MERS, meanwhile, was created by the mortgage industry in the early 1990s to make it easier to bundle and sell promissory notes and their related security interests on the secondary market. MERS is not itself a lender. Rather, lenders, loan servicers, investors, and other industry participants can become members of MERS. When a MERS member originates a home loan, MERS — as opposed to the lender — is named as the "beneficiary" of the trust deed that the home buyer provides as security for the home loan. MERS then allows members to transfer and track their beneficial interests in those promissory notes and associated trust deeds through a private, internal database rather than by publicly recording each assignment in county mortgage records.
The question before us — and one that homeowners and MERS are litigating throughout the country under similar state laws
The trial court granted summary judgment in favor of MERS and the other defendants (the loan servicer and the trustee), ruling that MERS was the designated "beneficiary" of the trust deed and that each statutory requirement for nonjudicial foreclosure had been met — including the requirement that any assignments of the trust deed must be recorded in the county mortgage records, ORS 86.735(1). Plaintiff now appeals, again arguing that the "Oregon legislature intended the `beneficiary' to be the one for whose benefit the [deed of trust] is given, which is the party who lent the money," rather than MERS. We agree and hold that the "beneficiary" of a trust deed under the Oregon Trust Deed Act is the person designated in that trust deed as the person to whom the underlying loan repayment obligation is owed. The trust deed in this case designates the lender, GreenPoint Mortgage Funding, Inc., as the party to whom the secured obligation is owed. And, because there is evidence that GreenPoint assigned its beneficial interest in the trust deed but did not record that assignment, the trial court erred in granting summary judgment in favor of defendants.
Because the facts giving rise to this dispute are best understood in their broader context, we begin with a brief overview of Oregon's nonjudicial foreclosure laws, recording statutes, and the nature of MERS. We then focus on plaintiff's trust deed, the facts surrounding the trustee's notice of the sale of plaintiff's home, and the trial court proceedings.
For the first hundred years of statehood, real estate loans in Oregon were typically secured by mortgages. See, e.g., Sellwood v. Gray & DeLashmutt, 11 Or. 534, 5 P. 196 (1884) (describing various principles of mortgage law). By statute, Oregon law provided (and still provides) that "[a] mortgage of real property is not a conveyance so as to enable the owner of the mortgage to recover possession of the property without a foreclosure and sale." ORS 86.010. Rather, a mortgage creates a lien on the property that can be foreclosed, like other liens, only by way of judicial action, after a lawsuit has been filed. See ORS 88.010. And, as is the case with other liens, the judicial foreclosure process includes a statutory right to redemption. That is, once a court issues a decree of foreclosure in favor of the mortgagee, thereby ordering the mortgaged property to be sold, the mortgagor nonetheless retains the right to satisfy the debt and redeem the property for a period of time after the sale. ORS 88.080; ORS 88.100; ORS 23.410-23.600 (1957).
By the late 1950s, there was a movement afoot to streamline certain features of Oregon's mortgage laws — particularly, judicial involvement and the statutory right to redemption by borrowers and junior lienholders. See Minutes, Senate Judiciary Committee, SB 172, Feb. 19, 1957. In 1959, the legislature responded by enacting what is known as the Oregon Trust Deed Act (OTDA), ORS 86.705 to 86.795, as an alternative to the judicial foreclosure process.
If each of those requirements is met, the trustee can then provide the grantor and others with notice of the intended sale; that notice likewise must meet various statutory criteria. E.g., ORS 86.737 (describing the form of the notice); ORS 86.740 (listing persons to whom notice of sale must be given); ORS 86.745 (contents of the notice); ORS 86.750 (service and publication requirements of notice of sale). If the trustee provides the required notice of the sale to the proper parties, and otherwise conducts the sale according to the statutory requirements, the trust deed grantor — unlike a traditional mortgagor — has no statutory right to redeem the property after the trustee's sale. See ORS 86.770 (describing effect of a trustee's sale).
Operating in the background of the OTDA are Oregon's recording laws. See, e.g., ORS 86.735(1) (requiring trust deeds, assignments of trust deeds, and appointments of successor trustees to be recorded in appropriate county mortgage records). Like every other state, Oregon has enacted recording statutes that govern priorities with respect to interests in real property. Those statutes generally serve two related purposes: They protect bona fide purchasers who acquire interests in real property for consideration and without notice of prior interests. E.g., ORS 93.640 ("Every conveyance, deed, land sale contract, assignment of all or any portion of a seller's or purchaser's interest in a land sale contract or other agreement or memorandum thereof affecting the title of real property within this state [including mortgages and trust deeds] which is not recorded as provided by law is void as against any subsequent purchaser in good faith and for a valuable consideration of the same real property * * *."). Conversely, they allow prospective purchasers to consult the public records and discover prior claims that might affect their interests, and they protect recorders by putting prospective purchasers on notice of those prior claims. ORS 93.710(1).
Oregon's recording laws require the county clerk to keep a separate book and index for recorded mortgages. ORS 93.610; ORS 93.630. And, as later discussed in more detail, there are also specific recording requirements for discharging a mortgage. See,
Since at least the late 1800s, Oregon law has also expressly permitted the recording of assignments of mortgages. See ORS 86.060 ("Mortgages may be assigned by an instrument in writing, executed and acknowledged with the same formality as required in deeds and mortgages of real property, and recorded in the records of mortgages of the county where the land is situated."); ORS 205.130(2)(a) (county clerk shall record all "[d]eeds and mortgages of real property, powers of attorney and contracts affecting the title to real property, authorized by law to be recorded, assignments thereof and of any interest therein when properly acknowledged or proved and other interests affecting the title to real property required or permitted by law to be recorded"); see generally Barringer v. Loder, 47 Or. 223, 81 P. 778 (1905) (explaining history of statutes regarding recording of mortgage assignments).
Those recording laws for mortgages were in place in 1959 when the legislature enacted the OTDA and, as later discussed in more detail, generally apply equally to the recording of trust deeds. ORS 86.715. For now, suffice it to say that the trustee may foreclose a trust deed under the OTDA if certain public recording requirements are satisfied — namely, that "[t]he trust deed, any assignments of the trust deed by the trustee or the beneficiary * * * are recorded in the mortgage records in the counties in which the property described in the deed is situated." ORS 86.735(1).
In the first few decades after the OTDA was enacted, real estate loans in Oregon fit neatly into its scheme: A lender originated a home loan; as security for the loan, a borrower executed a trust deed that named the lender as the beneficiary; and assignments of the trust deed from the lender-beneficiary, if any, were recorded in the mortgage records of the county in which the home was located. That changed, however, with the growth of the market for mortgage-backed securities and the consequent development of MERS.
In 1993, various mortgage industry participants proposed the MERS system as an expedient alternative to recording multiple transfers of beneficial interests in loan obligations in the county records. Under that system, companies that participate in the mortgage industry, such as lenders and servicing institutions, can become members of MERS and pay a fee to use the MERS system, a private electronic database that tracks the transfer of beneficial interests in loan obligations.
When a MERS member originates a home loan, the loan is assigned an 18-digit "Mortgage Identification Number" in the MERS database. If, as is often the case, the loan obligation is secured by a trust deed, MERS is designated in that trust deed as the "nominee" for the member and for the member's successors and assigns. MERS is also named as the "beneficiary" of the trust deed. If the MERS member sells or assigns the beneficial interest in the loan obligation to another member, that transfer is tracked in the MERS database (by the loan's Mortgage Identification Number). The transfer is not recorded in the county records, and MERS continues to act as "beneficiary" of the trust deed.
In August 2006, plaintiff entered into a home loan agreement with GreenPoint, a MERS member. In exchange for the loan, plaintiff signed a promissory note in which she promised to pay $236,000, plus interest, to GreenPoint. Plaintiff also executed a "Deed of Trust," which was subsequently recorded in Clackamas County. The trust deed states that "Mortgage Electronic Registration Systems, Inc. (MERS) is the Grantee of this Security Instrument," and it includes various "definitions":
(Uppercase in original; emphasis added.) The trust deed also provides:
(Uppercase in original; emphasis added.)
On April 17, 2009, MERS recorded a document appointing a successor trustee, LSI Title Company of Oregon, LLC. Sometime after that date, plaintiff received a "Trustee's Notice of Sale" from Defendant Executive Trustee Services, Inc., agent for LSI Title Company. That notice of sale identified "`MERS' MORTGAGE ELECTRONIC REGISTRATION SYSTEMS, INC., SOLELY AS NOMINEE FOR LENDER GREENPOINT MORTGAGE FUNDING, INC., as Beneficiary[.]" (Uppercase in original.) It further stated that plaintiff was in default and that "[b]oth the beneficiary and trustee have elected to sell the said real property to satisfy the obligations secured by said trust deed and notice has been recorded pursuant to [ORS] 86.735(3) * * *." The sale was scheduled for September 2, 2009.
Plaintiff, upon receiving the notice of trustee's sale, sent a letter, by way of her attorney, to Executive Trustee Services. In the letter, plaintiff demanded that the sale be canceled and requested that Executive Trustee Services provide various documents, including documents establishing the "entire chain of title to the Deed of Trust and note." Plaintiff contends that she never heard back from Executive Trustee Services in response to that letter or her follow-up letter, but the trustee's sale was apparently canceled and rescheduled for February 1, 2010.
On February 1, the supposed date of the trustee's sale, plaintiff filed this action for declaratory relief and injunctive relief against Executive Trustee Services, MERS, and GMAC Mortgage, LLC (GMACM), the company that was servicing the loan. Plaintiff alleged that defendants were "attempting to conduct a Trustee's Sale of the Plaintiff's residential real property by rescheduling a Trustee's Sale without notice to the Plaintiff and where the Defendants have not only failed to provide any evidence that they have any legal interest in either the Note or the Deed of Trust but have also specifically ignored and refused Plaintiff's multiple prior requests for specific information * * * including but not limited to the history of the chain of title to the Note and Deed of Trust."
Defendants moved for summary judgment on plaintiff's claims, arguing that plaintiff was in default on the note and that GMACM — the "holder of the Note" — and MERS — the "beneficiary of the Deed of Trust" — were entitled, as a matter of law, to foreclose the trust deed. Specifically, defendants explained:
In response, plaintiff argued, among other contentions, that MERS "is not the `beneficiary' of anything despite boilerplate language in Deeds of Trust." (Emphasis and underscoring in original.) The beneficiary under the OTDA, plaintiff explained, is the person who benefits from the trust deed — i.e., "the one that lends the money." (Internal quotation marks and citation omitted.) The identity of the "beneficiary" matters, plaintiff contended, because nonjudicial foreclosure is only available if "any assignments of the trust deed by the trustee or the beneficiary and any appointment of a successor trustee are recorded in the mortgage records in the counties in which the property described in the deed is situated." ORS 86.735(1). "[W]hat that's telling us in that statute," plaintiff's counsel argued, "is that if there are any assignments which are necessary because the original lender is not the one that's seeking to foreclose, that assignment would have to be recorded, as I'm reading this."
As the parties' arguments unfolded at the hearing, much of the dispute hinged on whether subsection (1) of that statute had been satisfied: i.e., whether there had been an unrecorded assignment by the "beneficiary."
Ultimately, the trial court was not persuaded that the statutory text or other sources of Oregon law precluded MERS from acting as "beneficiary" of a trust deed under the OTDA. Consequently, there was no genuine issue of fact regarding "any assignments" of the trust deed being recorded; MERS had never assigned its beneficial interest in the trust deed. Seeing "nothing that indicates that there has been a failure to comply with ORS 86.735," the court granted defendants' motion and entered judgment against plaintiff.
Plaintiff now appeals that judgment, reprising her argument that MERS is not actually the "beneficiary" of the trust deed under the OTDA.
We turn, then, to the primary issue before us: the meaning of the term "beneficiary" in ORS 86.735(1), which we discern from the text, context, and helpful legislative history of the statute.
(Emphasis added.)
As noted above, the trust deed in this case stated, "MERS is the beneficiary under this Security Instrument." According to defendants, that is the end of the debate. MERS, under the plain language of the trust deed, is the person named and designated in the trust deed as the beneficiary, and nothing in the OTDA expressly prohibits the parties from contractually agreeing to designate MERS in that way. In other words, absent some express prohibition on this type of arrangement, the person "for whose benefit a trust deed is given" is whoever the trust deed says it is.
We are not persuaded that the legislature intended circularity and redundancy in defining beneficiary. The legislature could have simply defined "beneficiary" as the person named or otherwise designated in a trust deed as the beneficiary. Instead, the legislature used the phrase "the person for whose benefit a trust deed is given[.]" We presume that the legislature used that different language for a reason. State v. Cloutier, 351 Or. 68, 98, 261 P.3d 1234 (2011) (although redundancy may sometimes be what the legislature
Considering the statutory and historical context of the OTDA, we are persuaded, further, that the legislature understood the "person for whose benefit a trust deed is given" to refer to a particular person — namely, the person to whom the underlying, secured obligation is owed. As previously discussed, the OTDA was enacted with the express understanding that trust deeds would function as a species of mortgage. ORS 86.715 ("A trust deed is deemed a mortgage * * *."). The "benefit" of the trust deed, like a mortgage, is security for an underlying obligation. Indeed, that understanding of the "benefit" of the trust deed — security of an obligation owed to the beneficiary — permeates the statutory scheme. It is present in the definition of "trust deed": "a deed executed in conformity with ORS 86.705 to 86.795, and conveying an interest in real property to a trustee in trust to secure the performance of an obligation owed by the grantor or other person named in the deed
Nothing in the text, context, or legislative history of the OTDA suggests that the legislature intended the "person for whose benefit a trust deed is given" to refer to anyone other than the party to whom the secured obligation was originally owed. ORS 86.705(1). And, as a matter of historical context, defendants' construction of the statute is not consistent with how security instruments in the nature of mortgages functioned. By the time the OTDA was enacted in 1959, it was well established that the mortgage was merely an incident to the underlying debt. See Beauchamp v. Jordan, 176 Or. 320, 327, 157 P.2d 504 (1945) ("They were merely an incident to the debts evidenced by the above-mentioned notes and the transfer of the notes effected a transfer of these mortgages." (Citations omitted; emphasis added.)); Rutherford v. Eyre & Co., 174 Or. 162, 172, 148 P.2d 530 (1944) ("[S]ome point is sought to be made by the plaintiffs of the fact that the collateral agreements were not formally assigned to Eyre and Co. But this, of course, was not essential; the mortgages were but incidents to the notes, and endorsement and delivery of the notes carried the mortgages with them * * * and necessarily, also, the collateral agreements, as an integral part of those instruments."); Schleef v. Purdy et al., 107 Or. 71, 78, 214 P. 137 (1923) ("Until foreclosure and sale the mortgage is a mere chose in action secured by a lien upon the land, which gives to the mortgagor no title or estate whatever to the mortgaged premises. The mortgagor has no interest in the mortgaged premises which he can sell or which can be sold separately from the debt itself, and the transfer of the mortgage, without a transfer of the debt intended to be secured thereby, is a mere nullity. * * * A mortgage given as security for the payment of a note may be transferred either by the indorsement of the note and the surrender of its possession or, if the note is payable to bearer, by the mere delivery thereof and the surrender of its possession, and this transfer of the note, without any formal transfer of the mortgage, transfers the mortgage [.]" (Emphasis added.)). In other words, the underlying debt and the security for that debt were not separately transferrable; the party who benefitted from the mortgage and the party to whom the obligation was owed were one and the same.
Defendants, although acknowledging that mortgages were historically considered an "incident to the debt," argue that the legislature
Defendants have conflated two issues: (1) who is the "beneficiary" under ORS 86.705(1); and (2) who can act on behalf of that beneficiary. The former is the statutory construction question before us, and, in our view, neither agency nor nominee law provides relevant context as to that question, let alone context that demands a modified statutory definition. Moreover, defendant's suggestion that a nominee or agent might hold "legal title" as the "beneficiary" of a trust deed finds no support in the OTDA or Oregon case law. It is true that "Oregon has recognized since 1862 that one person may hold legal title to property and that another person may hold equitable title to that property." Klamath Irrigation District. v. United States, 348 Or. 15, 43, 227 P.3d 1145 (2010). But, if anything, that body of law suggests that the holder of legal title under OTDA would be the trustee, not a separate "nominee" or "agent" acting on behalf of the beneficiary.
Defendants' reliance on ORS 86.720(3) is also misplaced. That statute, which involves
In sum, we are persuaded that the "benefit" of the trust deed is security for the underlying obligation, and that "the person named or otherwise designated in a trust deed as the person for whose benefit a trust deed is given" refers to the person named or designated in the trust deed as the party to whom the underlying, secured obligation is owed. We turn, then, to the trust deed at issue.
As described above, the trust deed states that GreenPoint Mortgage Funding, Inc. is the "lender." It further states that "MERS is a separate corporation that is acting solely as a nominee for Lender and Lender's successors and assigns. MERS is the beneficiary under this Security Instrument." In a later section, the trust deed explains that the beneficiary of the trust deed is "MERS (solely as nominee for Lender and Lender's successors and assigns) and the successors and assigns of MERS."
Despite referring to MERS as the beneficiary, the trust deed designates GreenPoint as the party to whom plaintiff, the borrower, owes the obligation secured by the trust deed. The trust deed explicitly "secures to Lender: (i) the repayment of the Loan * * * and (ii) the performance of Borrower's covenants and agreements * * *." For the reasons discussed above, GreenPoint, the lender, is therefore the "beneficiary" of the trust deed within the meaning of ORS 86.705(1), whereas MERS is designated as an agent or nominee of GreenPoint.
Consequently, we conclude that the trial court erred in granting summary judgment in favor of defendants in this case. The trial court, with MERS in mind as the "beneficiary," examined the requirements of ORS 86.735, including the requirement in subsection (1) that "any assignments of the trust deed by the trustee or the beneficiary * * * are recorded in the mortgage records * * *." There was no genuine issue of material fact regarding the requirement in ORS 86.735(1), the court concluded, because MERS had never assigned the trust deed. The same cannot be said with respect to GreenPoint as beneficiary.
There is evidence in the summary judgment record that GreenPoint transferred its interest in the promissory note, the obligation secured by the trust deed. Transfer of the promissory note was one of the ways that a mortgage was "assigned" when the OTDA was enacted; the other was by a separate written document. 251 Or.App. at 284-86, 295-96, 284 P.3d at 1160-61, 1166-67; Barringer, 47 Or. at 229-30, 81 P. 778. We have no reason to believe that the legislature intended Oregon law regarding the "assignment" of trust deeds to be any different from mortgages. Trust deeds are "deemed to be a mortgage" unless inconsistent with the OTDA, and nothing in the OTDA prescribes any other method of assignment. Thus, like a mortgage, a trust deed may be assigned (1) by a separate writing or (2) by the assignment of the underlying promissory note.
The OTDA, as previously discussed, requires that "any assignments" be "recorded
Neither argument is persuasive. First, the text of the OTDA, which refers broadly to "any assignment," does not suggest any distinction between those assignments that are readily recordable and those that are not. But, in any event — and contrary to defendants' assertion — an assignment by "transfer of a note" is, in fact, capable of being recorded. Nothing prevents parties from recording a copy of the indorsed note or a separate writing memorializing that transfer.
Second, ORS 86.110(1), as it read when the OTDA was enacted and as it still reads today, refers to the discharge of a mortgage that has been transferred by indorsement "without a formal assignment" of the mortgage. ORS 86.110(1) (emphasis added). That statutory language is consistent with the understanding, well established at the time the OTDA was enacted, that there were two methods of assignment, one "formal" and the other by indorsement. As noted above, the text of the OTDA — "any assignments" — is broad enough to encompass both. Moreover, we do not perceive a conflict between, on the one hand, a requirement that "any assignment" be recorded before proceeding with nonjudicial foreclosure, and, on the other hand, a statutory procedure that governs proof of satisfaction where a mortgage is transferred without a "formal assignment." The statutes address different subjects and use different language.
In this summary judgment record, there is evidence that GreenPoint assigned its interest in the promissory note and no longer has any beneficial interest in the trust deed; however, there is no evidence that the county mortgage records actually reflect an assignment by GreenPoint. Thus, the trial court erred in granting defendants' summary judgment motion, because there are genuine issues of material fact as to whether one of the requirements for nonjudicial foreclosure, ORS 86.735(1), has been satisfied.
In sum, we conclude that the "beneficiary" of a trust deed for purposes of the OTDA is the person named or otherwise designated in the trust deed as the person to whom the secured obligation is owed — in this case, the original lender. We further conclude that, because there is evidence that the beneficiary assigned its interest in the trust deed without recording that assignment, there is a genuine issue of material fact on this summary judgment record as to whether ORS 86.735(1), a predicate to nonjudicial foreclosure, has been satisfied. We emphasize, however, that our holding concerns only the requirements for nonjudicial foreclosure. Cf. ORS 86.710 (beneficiary of the trust deed retains the option of judicial foreclosure). And the import of our holding is this: A beneficiary that uses MERS to avoid publicly recording assignments of a trust deed cannot avail itself of a nonjudicial foreclosure process that requires that very thing — publicly recorded assignments.
Reversed and remanded.
We further note that defendants do not argue, at least at the summary judgment stage, that plaintiff is somehow estopped from insisting upon compliance with the OTDA, and we expressly do not address that issue.
(Emphasis added.)
