Court Opinion

ID: 867034
Source: CourtListenerOpinion
Date Created: 2013-05-09 15:25:12.230199+00
Date Added: 2024-06-11T09:06:46.523961
License: Public Domain

IN THE SUPREME COURT, STATE OF WYOMING

                                      2013 WY 54

                                                         APRIL TERM, A.D. 2013

                                                                May 8, 2013

In re:

RALPH GIFFORD and BETTY J.
GIFFORD,

Debtors,

GARY A. BARNEY, TRUSTEE,

Appellant                                        S-12-0177
(Plaintiff),

v.

BAC HOME LOANS SERVICING, L.P.,
its assigns and successors,

Appellee
(Defendant).

                             W.R.A.P. 11 Certified Question
           from the United States Bankruptcy Court for the District of Wyoming
                          The Honorable Peter J. McNiff, Judge

Representing Appellant:
      Bradley T. Hunsicker and Stephen R. Winship of Winship and Winship, P.C.,
      Casper, WY. Argument by Mr. Hunsicker.

Representing Appellee:
      Thomas M. Hefferon of Goodwin Proctor LLP, Washington, D.C.; and James R.
      Belcher of Belcher & Boomgaarden LLP, Cheyenne, WY. Argument by Mr.
      Hefferon.

Before KITE, C.J., HILL, BURKE, and DAVIS, JJ., and GOLDEN, J., Retired.
NOTICE: This opinion is subject to formal revision before publication in Pacific Reporter Third.
Readers are requested to notify the Clerk of the Supreme Court, Supreme Court Building,
Cheyenne, Wyoming 82002, of any typographical or other formal errors so that correction may be
made before final publication in the permanent volume.
HILL, Justice.

[¶1] The United States Bankruptcy Court for the District of Wyoming certified a
question to this Court concerning the effect of two Wyoming statutes on a debtor’s
mortgage. Specifically, the bankruptcy court asks whether the mortgage must comply
with Wyo. Stat. Ann. §§ 34-2-122 and 34-2-123. We answer the question in the negative.

                                              ISSUE

[¶2] The United States Bankruptcy Court for the District of Wyoming certified the
following question to this Court:

                    Whether the mortgage must comply with Wyo. Stat.
              Ann. §§ 34-2-122 and 34-2-123?

                                             FACTS

[¶3] We draw the facts from the Statement of Undisputed Stipulated Facts filed by the
parties in the bankruptcy adversary proceeding and referred to this Court with the
certified question.

[¶4] On January 26, 2006, Betty J. Gifford (Debtor) borrowed $438,400.00 from The
Jackson State Bank & Trust (JSB) to finance a real estate purchase in Pinedale,
Wyoming. Debtor signed a promissory note (Note) agreeing to repay the loan and
secured that loan with a mortgage (Mortgage). JSB sold the loan to Countrywide Bank,
N.A. (Countrywide), and JSB endorsed the Note, making it payable to Countrywide.
Countrywide later merged with and into Bank of America, N.A. (BANA), and BANA
remains the current owner of the Note.

[¶5] On February 1, 2006, the Mortgage was recorded in the Sublette County land
records. An assignment of the Mortgage from JSB to Mortgage Electronic Registration
Systems, Inc. (MERS) was recorded in the Sublette County land records several days
later on February 13, 2006.1
1
  By way of background, the Tenth Circuit Bankruptcy Appellate Panel has described MERS and its
operations as follows:

                  MERS is a private corporation that administers the MERS
                  System, a national electronic registry that tracks the transfer of
                  ownership interests and servicing rights in mortgage loans.
                  Through the MERS System, MERS becomes the mortgagee of
                  record for participating members through assignment of the
                  members’ interests to MERS. MERS is listed as the grantee in
                  the official records maintained at county register of deeds
                  offices. The lenders retain the promissory notes, as well as the

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[¶6] The recorded assignment of the Mortgage to MERS did not describe MERS as an
agent or as acting in a representative capacity. The recorded assignment instead
provided:

                FOR VALUE RECEIVED, the undersigned hereby grants,
                assigns and transfers to Mortgage Electronic Registration
                Systems, I n c . a l l t h e rights, title and interest of [the]
                undersigned in and to that certain Real Estate Mortgage dated
                January 26, 2006, executed by Betty J. Gifford, a married
                woman, to THE JACKSON STATE BANK & TRUST and
                whose address is 112 CENTER ST., P O BOX 1788
                JACKSON, WY 83001 and recorded in Book/Volume No.
                131 Mtg., page(s) 740, as Document No. 316732, Sublette
                Records, State of Wyoming on real estate legally described as
                follows: Tract 1 of the Mountain View Ranches, Sublette
                County, Wyoming.

[¶7] On October 21, 2009, MERS assigned the Mortgage to BAC Home Loans
Servicing, LP (BAC), which was servicing the loan on behalf of BANA. That
assignment was recorded in the Sublette County land records on October 27, 2009, and

                    servicing rights to the mortgages. The lenders can then sell these
                    interests to investors without having to record the transaction in
                    the public record. MERS is compensated for its services through
                    fees charged to participating MERS members.

                The MERS system was designed to facilitate the transfer of notes and
                accompanying mortgages and deeds of trust because such transfers had
                become cumbersome under the traditional recording procedures. The
                system tracks transfers of promissory notes and changes in loan
                servicers. In a mortgage loan transaction, MERS acts as the mortgagee
                and holder of the title to the security interest in a representative capacity
                as the agent (nominee) of the lender and the lender’s successors and
                assigns. Subsequent transfers of the note as well as assignments of
                servicing rights are tracked in the MERS database, but are not recorded
                in the public records, since notes are not recorded. Upon transfer of a
                note secured by a mortgage, there is no separate assignment of the
                security interest and there is no change in the mortgagee, since MERS
                remains the mortgagee and holder of legal and record title to the
                mortgage on behalf of the new lender, as successor or assign of the
                original lender.

Royal v. First Interstate Bank (In re Trierweiler), 484 B.R. 783, 794-95 (B.A.P. 10th Cir. 2012) (quoting
Mortg. Elec. Registration Sys.v. Neb. Dep’t of Banking & Fin., 704 N.W.2d 784, 785 (Neb. 2005))
(footnotes omitted).

                                                      2
again the recorded assignment did not describe BAC as an agent or as acting in a
representative capacity. The recorded assignment reads:

                    FOR VALUE RECEIVED, the undersigned hereby
             grants, assigns and transfers to BAC Home Loans Servicing,
             L.P., whose address is 400 Countrywide Way, SV 35, P.O.
             Box 10232, Simi Valley, CA 93065-6298, all the rights, title
             and interest in and to that certain Real Estate Mortgage dated
             January 26, 2006, executed by Betty J. Gifford, to the Jackson
             State Bank & Trust and recorded on February 1, 2006, at
             Reception No. 316732 in Book 131 at Page 740 of the
             Official Records in the County Recorder’s Office of Sublette
             County, State of Wyoming on real estate legally described as
             follows:
                    TRACT 1 OF THE MOUNTAIN VIEW RANCHES,
                    SUBLETTE COUNTY, WYOMING.
                    with an address of 49 Glacier Road, Pinedale, WY
                    82941
                    TOGETHER with all its rights, title and interest in the
             note thereon described or referred to, the money due and to
             become due thereon with interest.

[¶8] The Debtor defaulted on her home loan by failing to make the monthly payment
due on April 1, 2009, and failing to cure that default. Several months later, on December
11, 2009, Debtor and her husband filed a Chapter 7 bankruptcy petition. On November
30, 2010, the bankruptcy trustee initiated an adversary proceeding against BAC, seeking
to avoid the Mortgage for, among other reasons, its failure to comply with the
requirements of Wyo. Stat. Ann. §§ 34-2-122 and 34-2-123. On August 7, 2012, the
bankruptcy court filed a Certification Order from the United States Bankruptcy Court for
the District of Wyoming to the Supreme Court of the State of Wyoming requesting that
this Court answer the certified question. The request was limited to the question of
whether the Mortgage must comply with the requirements of §§ 34-2-122 and 123, and
did not include certification of the trustee’s other challenges to enforceability of the
Mortgage. On August 29, 2012, this Court issued a Notice of Agreement to Answer
Certified Question.

                                    DISCUSSION

[¶9] The bankruptcy trustee argues that because the recorded assignments of the
Mortgage, first to MERS and then to BAC, did not identify with specificity the terms of
the agency relationship between the holder of the Note and the holder of the Mortgage,
the recorded assignment did not comply with §§ 34-2-122 and 123. The trustee further
argues that the failure to comply with these statutory terms renders the Mortgage

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unenforceable. We disagree that Sections 122 and 123 operate in the manner urged by
the bankruptcy trustee and instead conclude as BAC urges that the purpose and effect of
these provisions is to bar an undisclosed or improperly disclosed principal from
questioning an agent’s authority to transfer a property interest to a third party. Given the
plain language of the provisions and their narrow and specific purpose, we conclude that
the provisions are not implicated in this case, and the Mortgage was not required to
comply with Sections 122 and 123.

[¶10] Our analysis is one of statutory interpretation and it thus begins with the language
of Sections 122 and 123 and our rules of statutory interpretation. Section 122 provides,
in relevant part:

                      In all instruments conveying real estate, or interests
              therein, in which the grantee is described as trustee, agent, or
              as in any other representative capacity, the instruments of
              conveyance shall also define the trust or other agreement
              under which the grantee is acting. . . . [O]therwise the
              description of a grantee in any representative capacity in each
              instrument of conveyance shall be considered and held to be a
              description of the grantee, only, and shall not be notice of any
              trust, agency or other representative capacity of the grantee
              who shall be held as vested with the power to convey,
              transfer, encumber or release the affected title. Whenever the
              grantee shall execute and deliver a conveyance, transfer,
              encumbrance or release of the property in a representative
              capacity, it shall not thereafter be questioned by anyone
              claiming as a beneficiary under the trust or agency or by
              anyone claiming by, through or under any undisclosed
              beneficiary. …

Wyo. Stat. Ann. § 34-2-122 (LexisNexis 2011).

[¶11] Section 123 provides, in relevant part:

                     Any instrument which complies with this act [§§ 34-2-
              116, 34-2-122 and 34-2-123] shall be effective regardless of
              when it was executed or recorded. All instruments of
              conveyance to, or transfer, encumbrance or release of, lands
              or any interest therein within the state of Wyoming, which
              name a grantee in a representative capacity, or name a trust as
              grantee, and which fail to provide the information required by
              W.S. 34-2-122, shall cease to be notice of any trust or
              representative capacity of the grantee and shall be considered

                                             4
             and held to be a description of the grantee only, who shall be
             held to have individually, the full power to convey, transfer,
             encumber or release the affected title and no conveyance,
             transfer, encumbrance or release shall thereafter be
             questioned by anyone claiming with respect to the affected
             property, as a beneficiary or by anyone claiming by, through,
             or under an undisclosed beneficiary[.] …

Wyo. Stat. Ann. § 34-2-123 (LexisNexis 2011).

[¶12] In carrying out our task of interpreting Sections 122 and 123, we use the following
well established rules of statutory interpretation:
             In interpreting statutes, our primary consideration is to
             determine the legislature’s intent. All statutes must be
             construed in pari materia and, in ascertaining the meaning of
             a given law, all statutes relating to the same subject or having
             the same general purpose must be considered and construed
             in harmony. Statutory construction is a question of law, so
             our standard of review is de novo. We endeavor to interpret
             statutes in accordance with the legislature’s intent. We begin
             by making an inquiry respecting the ordinary and obvious
             meaning of the words employed according to their
             arrangement and connection. We construe the statute as a
             whole, giving effect to every word, clause, and sentence, and
             we construe all parts of the statute in pari materia. When a
             statute is sufficiently clear and unambiguous, we give effect
             to the plain and ordinary meaning of the words and do not
             resort to the rules of statutory construction. Moreover, we
             must not give a statute a meaning that will nullify its
             operation if it is susceptible of another interpretation.
                    Moreover, we will not enlarge, stretch, expand, or
             extend a statute to matters that do not fall within its express
             provisions.
                    Only if we determine the language of a statute is
             ambiguous will we proceed to the next step, which involves
             applying general principles of statutory construction to the
             language of the statute in order to construe any ambiguous
             language to accurately reflect the intent of the legislature. If
             this Court determines that the language of the statute is not
             ambiguous, there is no room for further construction. We will
             apply the language of the statute using its ordinary and

                                             5
              obvious meaning.

Redco Constr. v. Profile Props., LLC, 2012 WY 24, ¶ 26, 271 P.3d 408, 415-416 (Wyo.
2012) (quoting Cheyenne Newspapers, Inc. v. Bldg. Code Bd. of Appeals, 2010 WY 2,
¶ 9, 222 P.3d 158, 162 (Wyo. 2010)). Even if a statute is unambiguous, this Court has
recognized the benefit of looking to a statute’s legislative history, however sparse that
might be, to confirm the legislative intent reflected in the statute’s plain language. See
Parker Land & Cattle Co. v. Wyoming Game & Fish Comm’n, 845 P.2d 1040, 1043-44
(Wyo. 1993); see also Union Pac. Res. Co. v. Dolenc., 2004 WY 36, ¶ 15, 86 P.3d 1287,
1292 (Wyo. 2004); Wilson v. State, 841 P.2d 90, 94 (Wyo. 1992).

[¶13] In the present case, the requirements of Sections 122 and 123 are not implicated
for two reasons. First, by their plain terms, the requirements of Sections 122 and 123
apply only to instruments in which the grantee is described as a trustee, agent, or as
serving in any other representative capacity. See § 3 4-2-122 (“In all instruments
conveying real estate, or interests therein, in which the grantee is described as trustee,
agent, or as in any other representative capacity, . . .”); § 34-2-123 (“All instruments of
conveyance to, or transfer, encumbrance or release of, lands or any interest therein within
the state of Wyoming, which name a grantee in a representative capacity, or name a trust
as grantee, . . .”). It is undisputed that the recorded assignments of the Mortgage, first to
MERS and then to BAC, do not identify MERS or BAC as a trustee, agent, or as serving
in any other representative capacity. Sections 122 and 123 therefore do not apply to the
Mortgage assignments at issue in this case.

[¶14] We further reject application of Sections 122 and 123 to the Mortgage assignments
in this case because the statutes are notice statutes intended to apply in circumstances that
simply are not presented by this case. By their plain terms, the statutes operate to protect
third parties from conflicting claims of principals and agents (or the conflicting claims of
beneficiaries/trustees, or of the parties to any other representative relationship). The
statutes expressly provide that the effect of a lack of full disclosure of a principal or
beneficiary is that the undisclosed principal or other beneficiary is thereafter barred from
questioning the agent’s authority to sell, transfer or release the property. In particular,
Section 122 directs that “[w]henever the grantee shall execute and deliver a conveyance,
transfer, encumbrance or release of the property in a representative capacity, it shall not
thereafter be questioned by anyone claiming as a beneficiary under the trust or agency
or by anyone claiming by, through or under any undisclosed beneficiary.” Wyo. Stat.
Ann. § 34-2-122 (emphasis added). Similarly, Section 123 specifies that the agent “shall
be held to have individually, the full power to convey, transfer, encumber or release the
affected title and no conveyance, transfer, encumbrance or release shall thereafter be
questioned by anyone claiming with respect to the affected property, as a beneficiary or
by anyone claiming by, through, or under an undisclosed beneficiary.” Wyo. Stat.
Ann. § 34-2-123 (emphasis added).

                                              6
[¶15] The plain language of Sections 122 and 123 is consistent with the legislature’s
expressed purpose when it originally enacted the provisions in 1947:

              AN ACT for the protection of those dealing with trustees,
              agents and representatives; prescribing authority of trustees,
              agents and representatives where trust provisions are not set
              forth or beneficiaries are not named in the instrument of
              conveyance to such trustee, agent or representative and
              providing that any such existing or past conveyance shall not
              be notice unless related, sworn statement is filed within ten
              years.

1947 Wyo. Sess. Laws, Ch. 154; see also In re Estate of Lohrie, 950 P.2d 1030, 1033
(Wyo. 1997).

[¶16] By their plain terms and stated legislative purpose, Sections 122 and 123 do not
invalidate or render unenforceable a mortgage simply because the recorded assignment of
that mortgage fails to include the statutorily mandated description of the principal/agent
relationship. Rather, the statutes operate to protect a third party who deals with the agent.
Thus, if the agent transfers the property to a third party, the third party is protected
against a claim by the agent’s principal challenging the agent’s authority to make the
transfer. See Lagae v. Lackner, 996 P.2d 1281, 1285-86 (Colo. 2000) (holding similar
Colorado statute to be a notice statute with the purpose of eliminating duty of inquiry and
preventing an undisclosed beneficiary from contesting the interest of a subsequent taker);
see also Trierweiler, 484 B.R. at 794-95 (holding Wyo. Stat. Ann. § 34-2-122 is a notice
statute and trustee’s attempt to invalidate mortgage was outside statute’s intended
purpose).

[¶17] Based upon the stipulated facts, this case does not present the circumstances
Sections 122 and 123 are intended to address. There was no transfer by MERS or BAC
to a third party, and there is no challenge by an undisclosed or improperly disclosed
principal to the actions of MERS or BAC. Stated simply, this case presents no
conflicting claims by a principal and an agent from which a third party needs protection,
and the statutes therefore do not apply.

                                     CONCLUSION

[¶18] We answer the certified question in the negative. Wyo. Stat. Ann. §§ 34-2-122
and 123 are notice statutes intended to protect third parties from conflicting claims of a
principal and agent. The Mortgage at issue in this case was not required to comply with
Sections 122 and 123 because a) the recorded assignment of the Mortgage did not
identify the grantee as acting in a representative capacity; and b) there were no

                                              7
conflicting claims of a principal and agent from which a third party would require
protection.

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