MERS Statement of the Law in Florida

MERS had two important victories in Florida appellate courts, which have unanimously decreed that MERS is permitted to foreclose mortgage liens when it is the holder of the note and mortgage. See Mortgage Electronic Registration Systems, Inc. v. Azize, (Fla. DCA Case No. 2D05-4544, opinion filed February 21, 2007) [32 Fla. L.Weekly D546]; Mortgage Electronic Registration Systems, Inc. v. Revoredo, et al., (Fla. 3d DCA No. 3D05-2572, opinion filed, March 14, 2007).

As background, in September 2005, we suspended the option of allowing MERS members to foreclose in MERS‟ name in Florida. We did so because we were in the process of appealing two adverse decisions against MERS‟ standing as a proper plaintiff in foreclosure actions in local trial courts. The first trial court decision came from Judge Logan in Pinellas County in the Azize case. Judge Logan issued an August 18, 2005 Decision on an Order to Show Cause why the Complaint should not be Dismissed for Lack of Proper Plaintiff. He dismissed with prejudice as to MERS and dismissed without prejudice as to the “proper Plaintiff”. He ruled that a party had to own the “beneficial interest” in the promissory note in order to foreclose on the note. Judge

Logan made this ruling despite the fact that the borrower had never appeared in the case to contest the foreclosure. We filed an appeal on September 14, 2005. A joint amicus brief was filed on our behalf by Fannie Mae, Freddie Mac, the MBA, JP Morgan Chase, and Countrywide.

The Jacksonville Area Legal Aid (JALA) filed an Amicus Brief in opposition.

We also appealed a similar Order in the Revoredo litigation entered by Judge Jon I. Gordon in Dade County on September 28, 2005. Judge Gordon held that a plaintiff must establish ownership of the note in order to have standing. JP Morgan Chase filed an Amicus Brief in support of our position.

MERS prevailed in the Pinellas County Appeal in the Azize decision, filed by the Second District Court of Appeal (“Second DCA”) on February 21, 2007. A unanimous appellate panel reversed Judge Logan‟s Order, and held that MERS could foreclose when it alleges that it is the holder of the note, and observed “standing is broader than just actual ownership of the beneficial interest in the note”. The Second DCA stated that Judge Logan‟s conclusion that MERS could never be a proper plaintiff since it did not have a beneficial interest in the notes was “an erroneous conclusion.” The Second DCA also observed in a footnote that, frequently, multiple entities hold a beneficial interest in a particular note, and that courts have routinely allowed agents, such as servicers, to bring foreclosure suits to enforce the note on behalf of the holders of beneficial interests in the note. Finally, the Second DCA explained that Florida‟s rules of civil procedure permit an action to be prosecuted “in the name of someone other than, but acting for, the real party in interest.”

Shortly after our victory in the Second DCA, the Third District Court of Appeal (“Third DCA”) reversed Judge Gordon‟s Order in Dade County in the Revoredo decision. The unanimous panel indicated that it agreed with the Second DCA‟s ruling that MERS had standing to foreclose, and that ruling was consistent “with the clear majority of cases which have considered the question of MERS‟ standing to maintain foreclosure proceedings.” The Third DCA observed, “[t]o the extent that courts have encountered difficulties with the question . . . the problem arises from the difficulty of attempting to shoehorn a modern innovative instrument of commerce into nomenclature and legal categories which stem essentially from the medieval English land law.”  Although MERS does not actually “own” the note it is foreclosing, the Third DCA stated “[w]e simply don’t think this makes any difference” and noted that the Florida rules of civil procedure allow an action to be brought by an authorized agent on behalf of the real party in interest. The Third DCA concluded that, since “no substantive rights, obligations, or defenses are affected by the use of the MERS device” there is no reason why mere form should overcome the salutary substance of permitting the use of this commercially effective means of business.” As a result of these two decisive victories in the Florida appellate courts, the right of MERS to foreclose in Florida is now firmly-established.

At the end of July 2007, MERS successfully defeated a putative class action case captioned Sandy S. Trent, etc., et al. v. Mortgage Electronic Registration Systems, Inc., United States District Court, Middle District of Florida Jacksonville Division, Case No. 3:06-cv-374-J-32HTS. This case involved an original complaint, a removal from state court to federal filed by MERS under the Class Action Fairness Act of 2005, an amended complaint and then finally the seconded amended complaint that the Court dismissed with prejudice. The Plaintiffs in this putative class action sought relief under two Florida statutes, the Florida Consumer Collection Practices Act (FCCPA) and the Florida Deceptive and Unfair Trade Practices Act (FDUTPA).

After the plaintiffs‟ revised the complaint twice in an attempt to state of cause of action, the FCCPA count essentially alleges that MERS “engaged in a pattern and practice of illegal debt collection practices” by sending pre-suit communications representing MERS as a “creditor” of the plaintiffs. The FDUTPA allegations were similar to the FCCPA count, but further alleged that MERS violated the ACT because it engaged in the unlicensed practice of law and used deceptive means to collect debts owed by class members.

The 20-page opinion stated that MERS is the mortgagee of the mortgages and has the ability to foreclose. By pointing to the language in the mortgage contract, the Court held that the mortgagors (Plaintiffs) were aware at the outset of MERS‟ role in the mortgage transaction and that MERS obtained legal title to the note and the ability to foreclose. The findings were that MERS did not attempt or threaten to enforce a debt obligation that it knew was not legitimate. In reviewing the pre-suit notices and the transaction itself, the Court stated, “it cannot identify any root abusive conduct.” The Court concluded that “MERS role was not hidden or materially misrepresented and a reasonable consumer in the plaintiffs‟ position would not likely to be misled in any material way by the pre-suit communications.”