Challenging MERS Agency In California Under RTC § 23302 – PART I
[This article is not to be construed as legal opinions or legal advice. Always seek the opinion of a licensed attorney in your jurisdiction when considering use of the contents of this article. The excellent legal analysis outlined in this article was conducted by paralegal Kimberly Cromwell in a Quiet Title action in California.]
“Knowing concealment of material facts is not the hallmark of good faith.” Palm Valley Homeowners Ass’n v. Design Mtc (2000) 85 Cal.App.4th 553, 562 [102 Cal.Rptr.2d 350].
It has now been ten-years since the financial collapse in 2008, and document fabrication mills continue to churn out assignments on behalf of MERS as an individual entity, or as an agent/nominee for long deceased or bankrupt entities. Well here is a California law that may become very useful when an assignment is presented and/or recorded by MERS as nominee for an entity that is under suspension by the California Franchise Tax Board:
RTC § 23302
(d) If a taxpayer’s powers, rights, and privileges are forfeited or suspended pursuant to Section 23301 , 23301.5 , or 23775, without limiting any other consequences of such forfeiture or suspension, the taxpayer shall not be entitled to sell, transfer, or exchange real property in California during the period of forfeiture or suspension.
As an example, I’ll use the California entity “Central Pacific Mortgage” (CPM) who is in FTB Suspension Status since September 1, 2009. Of note, a corporation in California cannot properly dissolve itself until its tax liabilities are resolved with the FTB. This is why there are hundreds of dormant “lenders” in the State of California who continue to sit in FTB Suspension Status who had utilized MERS as their agent/nominees.
In addition to the suspended entity not being allowed to sell and transfer property, it is equally important to note –
“A corporation may not prosecute or defend an action, nor appeal from adverse judgment in an action, while its corporate rights are suspended for failure to pay taxes under this section. Reed v. Norman (1957) 48 Cal.2d 338 [309 P.2d 809]; Cal Rev & Tax Code § 23301. The only solution for CPM or its nominee to have standing is by taking the necessary steps to revive CPM. Timberline, Inc. v. Jaisinghani (1997) 54 Cal.App.4th 1361 [64 Cal.Rptr.2d 4].”
Here is an assignment of deed of trust in California executed by MERS as nominee for CPM on November 18th, 2010; more than a year after CPM went into FTB Suspension. (See: Corporate Assignment – MERS as Nominee for Central Pacific Mortgage). This assignment has nothing to do with the case cites referenced in this article. I ran a check on this deed of trust which shows the debt had been securitized to a trust in 2007. However, this assignment states “EFFECTIVE DATE: 7/23/2008.” This sure looks like an attempt to back-date around the FTB Suspension Status of CPM. However, I highly doubt that the document fabrication mills are reviewing any of these laws or issues when churning out these assignments.
Those challenging an assignment with these facts will undoubtedly be met with an argument that the deed of trust and/or note was long ago transferred to undisclosed assigns, and that MERS remains an interested party indefinitely. This opens the door for discovery!
“MERS Must Prove it is the Agent of New Holder(s)
MERS is no longer an authorized agent of the holder unless it has a separate agency contract with the new undisclosed principal. In re Vargas (Bankr CD Cal 2008) 396 BR 511, 517, reported at 32 CEB RPLR 10 (Jan. 2009) the Court was disturbed that MERS moved for relief in what the Court determined was an improper attempt to obtain relief for undisclosed assigns. Id. at Overview. So disturbed that the Court sanctioned MERS for its attempt at trickery[1]. This is because, as discussed in detailed herein, MERS is an agent, not a separate party to the deed of trust. It must show that it continued as that agent by demonstrating a valid agreement with each subsequent successor and/or assign. It fails to provide any factual allegations that it was (or is) the agent. See Fed. Rules of Evid. Rule 803(7) and 803(10) [Absence of evidence is evidence that it does not exist or the event did not occur.]”
This is where MERS does not want to go. From experience investigating securitization transactions, most of the conduits and issuing entities in the securitization chain are not / were not MERS members with agency agreements. This is why the MERS Registry often shows the loans as being “inactive.” MERS’ own policy states that loans sold and transferred to non-MERS members are to be “Deactivated” in the MERS system. Theoretically, if the loans were ever really transferred to any trust, MERS would have deactivated itself and been removed from the chain of title. The servicers use MERS as an escape hatch in every chain of title, usually by arguing that if MERS is on a mortgage or deed of trust, it continues to have an active interest in the security instruments till the end of time, and regardless of any deaths, bankruptcies, or FTB Suspensions of its principals.
“MERS relies upon (Mortgage Elec. Registration Sys. v. Robinson (9th Cir. 2016) 671 F.App’x 562.) in which the Court held that MERS held an adverse interest because it had been named in the deed of trust. Id. at 563. This matter is distinguishable because MERS records show the deed of trust as being deactivated, and MERS allegations state the loan was sold to subsequent entities, but it has failed to provide any factual allegations (other than conclusory) it remained as the beneficiary throughout those assignments. MERS role as the nominal beneficiary has been extinguished since 2005, material facts not present in the Robinson matter.”
Make sure to check the FTB status in California of your lender on the deed of trust, even if you’re not in any sort of declared default.
In PART II of this article, I will discuss the Consent Decrees entered into by the document fabrication mill Nationwide Title Clearing whereby the Attorney Generals in both Illinois and Florida deemed MERS assignments of the notes / debt was an Unfair & Deceptive Trade Practice. This flies in the face of settled law that transfers of the security instrument without the debt is ineffective and a nullity. So why are these assignments still allowed any presumptions of validity as to the transfers of the debt?
Bill Paatalo
Oregon Private Investigator – PSID#49411
BP Investigative Agency, LLC Office: 1-(888)-582-0961
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