In answering a certified question, the Washington Supreme Court determined that MERS is not a “beneficiary” within the meaning of Washington’s Deed of Trust Act because MERS does not hold the promissory notes securing its customers’ deeds of trust. As a result, MERS lacks the power to appoint a trustee to proceed with a non-judicial foreclosure. The court reached its conclusion based on the plain language of the statute, which defines a “‘beneficiary’ as ‘the holder of the instrument or document evidencing the obligations secured by the deed of trust, excluding persons holding the same as security for a different obligation.’” The court found the definition of “holder” in the Uniform Commercial Code persuasive, which would require the beneficiary to “actually possess the promissory note or be the payee.”
In reaching its conclusion, the court rejected several arguments made by MERS. First, the court rejected MERS’ argument that the language in the statute that provides “unless the context clearly requires otherwise,” dictated a different conclusion. The court also rejected the argument that MERS was a beneficiary because it held the deed of trust as the agent of the lenders. Finally, the court rejected MERS’ public policy arguments noting that “[t]he legislature . . . is in the best position to assess policy considerations” and the court’s decision did not prevent the parties from proceeding with judicial foreclosure.While the court declined to answer the certified question as to the legal effect of MERS acting as an unlawful beneficiary, the court did note that MERS could not simply assign its legal interest in the deed of trust to the lender or holder. The court also concluded that a homeowner may have a cause of action under Washington’s Consumer Protection Act against MERS when MERS acts as an unlawful beneficiary under the Washington Deed of Trust Act.