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James Order

James Order

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Published by Foreclosure Fraud
4closureFraud.org
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Published by: Foreclosure Fraud on Mar 01, 2012
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08/12/2013

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IN
THE
UNITED STATES
DISTRICT COURT
FOR THE
DISTRICT
OF
OREGON
PORTLAND DIVISIONDOUGLAS
A.
JAMES and
EILEEN
M.JAMES, Husband and Wife,Plaintiffs,v.RECONTRUST COMPANY, an UnknownEntity Operating in the State
of
Oregon, BAC
HOME
LOAN SERVICING
LIMITED
PARTNERSHIP, a Texas LimitedPartnership,
MORTGAGE ELECTRONICREGISTRATION
SYSTEM, INC., aDelaware Corporation,
NORTHWESTMORTGAGE
GROUP, INC. an OregonCorporation,Defendants.Terry ScannellLAW OFFICE
OF
TERRY SCANNELL888 S.W. Fifth Avenue, Suite 650Portland, OR 97204
Of
Attorneys for PlaintiffsMegan
E.
SmithPilar
C.
FrenchLANE POWELL PC
601
S.W. Second Avenue, Suite 2100Portland, OR 97204
Of
Attorneys for DefendantsRobert
J.
PratteFULBRIGHT
&
JAWORSKI LLP
80
South Eighth Street2100 IDS CenterMinneapolis, MN 55402
Of
Attorneys for DefendantCase No.: 3:11-cv-00324-ST
OPINION
AND
ORDER
Mortgage Electronic Registration System, Inc.
Case 3:11-cv-00324-ST Document 65 Filed 02/29/12 Page 1 of 41 Page ID#: 1121
 
SIMON, District Judge.I. INTRODUCTION
In
the summer
of2007,
Plaintiffs Douglas A. James and Eileen
M.
James ("Plaintiffs")obtained a loan, secured
by
a trust deed, to purchase their home
in
Clackamas County, Oregon.When Plaintiffs defaulted on their loan three years later, Defendants ReconTrust Company("RTC"), BAC Home Loan Servicing L.P. ("BACHLS"), and Mortgage Electronic RegistrationSystem, Inc. ("MERS") began the non-judicial foreclosure process set forth in the Oregon TrustDeed Act ("ODTA"), Or. Rev. Stat. ("ORS") § 86.705,
et
seq.
Plaintiffs filed suit
in
state courtto stop the foreclosure, and Defendants removed the case to federal court. Dkt.
1.
Defendantsthen moved to dismiss under Rule 12(b)(6)
of
the Federal Rules
of
Civil Procedure. Dkt. 24.United States Magistrate Judge Janice Stewart issued Findings and Recommendation ("F&R"),concluding that this court should grant Defendants' motion. Dkt. 41. Plaintiffs filed timelyobjections, Dkt. 48, and Defendants responded. Dkt. 54. Under the Federal Magistrates Act, 28U.S.C. § 636(b), this court must review
de
novo
those portions
of
Judge Stewart's
F&R
to whichPlaintiffs object. Judge Stewart's report and the parties' objections and responses place beforeme an issue with which courts have been struggling, both in Oregon and nationwide.The OTDA requires that the trustee or beneficiary
of
a trust deed publicly record allassignments
of
the trust deed in the county or counties where the underlying real property islocated before the trustee
may
conduct a "foreclosure
by
advertisement and sale,"
i.e.
anon-judicial foreclosure.ORS § 86.735(1). Unless all such assignments have been publiclyrecorded, a foreclosure may occur only
by
using the more cumbersome, but also more protective,process
of
a judicial foreclosure under which the foreclosure is supervised by a judge.Page 2 -OPINION AND ORDER
Case 3:11-cv-00324-ST Document 65 Filed 02/29/12 Page 2 of 41 Page ID#: 1122
 
The primary question presented in this case is whether an entity such as MERS may be a"beneficiary" under the OTDA
ifit
is neither a lender nor a successor to a lender.
IfMERS
canbe a "beneficiary" under the OTDA in such circumstances, then any assignments
of
the trustdeed that were not publicly recorded and made only among the members
of
MERS (andprivately recorded only within the MERS internal database) would not preclude the availability
of
a non-judicial foreclosure. If, however, MERS is not a beneficiary under the OTDA, then theexistence
of
any assignments by a trustee or beneficiary that were not publicly recorded inappropriate county files would preclude a non-judicial foreclosure.Plaintiffs contend that, despite the trust deed's explicit declaration that MERS is thebeneficiary, the real beneficiary was first the original lender and then, in turn, each
of
severalsuccessor lenders (or noteholders). As the lender and then the successor noteholders transferredthe note and assigned the trust deed, no party recorded these assignments
in
the county records,according to Plaintiffs. Instead, MERS remained listed in the county records as the onlybeneficiary until it recorded an assignment to BACHLS, after which BACHLS appointed a
new
trustee. Plaintiffs argue that, under these facts, Defendants have not satisfied ORS § 86.735(1)and may not non-judicially foreclose.Defendants respond that the OTDA permits MERS, as the nominee, or agent, for thelender and its successors, to be the beneficiary. Defendants add that the trust deed, which wassigned
by
Plaintiffs, expressly names MERS as the beneficiary. Accordingly, Defendantscontend, the lender and successor noteholders did not need publicly to record assignments
of
thetrust deed because MERS, until its assignment
of
the trust deed to BACHLS, was always thebeneficiary. The only assignment that is required, Defendants argue, is the assignment fromPage 3 -OPINION AND ORDER
Case 3:11-cv-00324-ST Document 65 Filed 02/29/12 Page 3 of 41 Page ID#: 1123

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