Opinion ID: 3134113
Heading Depth: 4
Heading Rank: 1

Heading: Bain

Text: In Bain, we considered three certified questions concerning MERS. MERS is a corporation that maintains a private electronic registration system for tracking ownership of mortgage-related debt and is frequently listed as the 'beneficiary' of the deeds of trust that secure its customers' interests in the homes securing the debts. Bain, 175 Wn.2d at 88; see also id. at 94-98. The first certified question, 13 We recently issued our decision in Trujillo, reversing the Court of Appeals and holding, consistent with Lyons, that a trustee may not rely on an ambiguous declaration as to whether the beneficiary is the actual holder of a note. Trujillo, 183 Wn.2d at 826-27. -30- Brown v. Wash. State Dep 't of Commerce, No. 90652-1 relevant here, asked whether MERS [can be] a lawful beneficiary ... if it does not hold the promissory notes secured by the deeds of trust. !d. at 89. We answered the question no. See id. at 91 (CERTIFIED QUESTIONS: 1. Is [MERS] a lawful 'beneficiary' within the terms of the [DTA, RCW] 61.24.005(2), if it never held the promissory note secured by the deed of trust? [Short answer: No.] (third alteration in original)), 120 (CONCLUSION[:] Under the deed of trust act, the beneficiary must hold the promissory note and we answer the first certified question 'no.'). Bain thus recognized that holding the note is essential to beneficiary status. !d. This conclusion was primarily based on a plain reading of the definition ofbeneficiary in the statute. See id. at 98-99. We reasoned the DTA recognizes that the beneficiary of a deed of trust at any one time might not be the original lender. The act gives subsequent holders ofthe debt the benefit of the act by defining 'beneficiary' broadly as 'the holder of the instrument or document evidencing the obligations secured by the deed of trust.' !d. at 88 (quoting RCW 61.24.005(2)). The Bain opinion rejected various counterarguments and supported its primary reason in various ways, see id. at 98-110, 14 and its conclusion is clear. 14 Two of Bain' s supporting rationales are relevant here. First, Bain concluded that the beneficiary must hold the note for DTA purposes in order to harmonize the DTA with article 3 of the DCC because holding a note triggers PETE status under Article 3, RCW 62A.3-30l(i), and beneficiary status under RCW 61.24.005(2). See Bain, 175 Wn.2d at 103-04. Second, Bain supported its holding that the beneficiary must hold the note by referencing the FFA and recognizing that noteholders have the authority to modify a note. See id. at 103 ([I]f the legislature understood 'beneficiary' to mean 'noteholder,' then [the FFA's findings] make[] considerable sense because the legislature was attempting to create a framework where the stakeholders could negotiate a deal in the face of changing conditions.). -31- Brown v. Wash. State Dep 't of Commerce, No. 90652-1 Simply put, if MERS does not hold the note, it is not a lawful beneficiary. 15 !d. at 89. We follow Bain' s affirmation of the plain language of the definition of beneficiary in RCW 61.24.005(2). That statute defines a beneficiary as the holder of the instrument and makes no mention of ownership. RCW 61.24.005(2). Consistent with article 3 's recognition that a holder of a note is entitled to enforce the note, we adhere to Rain's holding that RCW 61.24.005(2) requires the beneficiary be the holder of the note. See Bain, 175 Wn.2d at 91, 120. To conclude otherwise-i.e., to hold that the beneficiary for purposes of the mediation exemption statute, RCW 61.24.166, is the owner and not the note holder-would undermine Bain' s core rationale that rested on the definition of a beneficiary in RCW 61.24.005(2) as the note holder. 16 15 Brown quotes statements from Bain that casually refer to ownership of the note. Br. of Appellant at 18, 30. The quotes are taken out of context from Bain's general background section on the DTA and in the analysis of the second certified question inBain, which is not at issue here. 16 Our recent decision in Cashmere Valley Bank, 181 Wn.2d 622, reinforces what we have said about the distinction between an owner of a note and a holder of a note. We held there that merely because an institution has a right to the economic benefits of mortgage-backed securities (i.e., is the owner of the mortgage notes or is a trust beneficiary where the settlor of the trust owns the notes) does not necessarily mean the institution has any legal recourse to the underlying trust assets in the event of default. Id. at 625. We further recognized an institution could be the person entitled to enforce the mortgage note, the PETE, even though it was not the owner. I d. at 626 n.4 (noting that when a lender sells a mortgage note on the secondary market, the lender may continue servicing the mortgage for a fee and in the event of the borrower's default, the lender may foreclose on the property and pass along proceeds from the sale, less the lender's fee or share, to the buyer), 636 (recognizing that when the trustee of a pool mortgage-backed securities holds the mortgage notes on behalf of the owner of the mortgage notes, the trustee can foreclose), 641 (similar). -32- Brown v. Wash. State Dep 't of Commerce, No. 90652-1