Court Opinion

ID: 2711545
Source: CourtListenerOpinion
Date Created: 2014-08-05 20:08:41.290665+00
Date Added: 2024-06-11T13:10:34.766484
License: Public Domain

668	                  June 6, 2013	                 No. 27

          IN THE SUPREME COURT OF THE
                STATE OF OREGON

                   Bart G. BRANDRUP
                and Jessica D. Brandrup,
                    husband and wife,
                        Plaintiffs,
                            v.
           RECONTRUST COMPANY, N.A.;
                 Bank of America, N.A.,
                successor by merger with
            BAC Home Loans Servicing, LP;
             The Bank of New York Mellon,
               fka The Bank of New York,
    as Trustee for The Certificate Holders Cwalt, Inc.,
           Alternative Loan Trust 2006-2CB,
          Mortgage Pass-through Certificates;
   and Mortgage Electronic Registration Systems, Inc.,
                       Defendants.
       United States District Court 311CV1390HZ

                   Russell R. POWELL
                   and Diane L. Powell,
                    husband and wife,
                        Plaintiffs,
                            v.
           RECONTRUST COMPANY, N.A.;
                 Bank of America, N.A.,
                successor by merger with
            BAC Home Loans Servicing, LP;
             The Bank of New York Mellon,
               fka The Bank of New York,
    as Trustee for The Certificate Holders Cwalt, Inc.,
           Alternative Loan Trust 2007-OH3,
  Mortgage Pass-through Certificates, Series 2007-OH3;
   and Mortgage Electronic Registration Systems, Inc.,
                       Defendants.
       United States District Court 311CV1399HZ
Cite as 353 Or 668 (2013)	669

                    Deanira MAYO
             and Reynalda Paez Plancarte,
                       Plaintiffs,
                           v.
           RECONTRUST COMPANY, N.A.;
                Bank of America, N.A.,
               successor by merger with
            BAC Home Loans Servicing, LP;
        Deutsche Bank National Trust Company,
      as Trustee for The Certificate Holders of the
  Morgan Stanley ABS Capital I, Inc., Trust 2005-HE2,
  Mortgage Pass-through Certificates, Series 2005-HE2;
   and Mortgage Electronic Registration Systems, Inc.,
                      Defendants.
       United States District Court 311CV1533SI

                 Omid MIRARABSHAHI,
                         Plaintiff,
                             v.
           RECONTRUST COMPANY, N.A.;
                  Bank of America, N.A.,
                 successor by merger with
             BAC Home Loans Servicing, LP;
              The Bank of New York Mellon,
                fka The Bank of New York,
 as Trustee for The Certificate Holders of CWMBS, INC.,
       CHL Mortgage Pass-Through Trust 2007-4,
    Mortgage Pass-through Certificates, Series 2007-4;
   and Mortgage Electronic Registration Systems, Inc.,
                       Defendants.
       United States District Court 312CV0010HA
                      (SC S060281)

   En Banc
   On certified questions from the United States District
Court; certification order dated April 2, 2012, certification
accepted July 19, 2012, argued and submitted January 8,
2013.
670	                                    Brandrup v. ReconTrust Co.

   Jeffrey A. Myers, Bowles Fernández Law LLC, Lake
Oswego, argued the cause for plaintiffs. With him on
the briefs were Jeffrey A. Myers, John Bowles, and Rick
Fernández.
   Gregory A. Chaimov, Davis Wright Tremaine LLP,
Portland argued the cause for defendant Mortgage Electronic
Registration Systems, Inc. With him on the brief were Kevin
H. Kono, Frederick B. Burnside, and P. Andrew McStay, Jr.,
Davis Wright Tremaine LLP, Portland.
   Thomas M. Hefferon, Goodwin Proctor LLP, Washington
DC, argued the cause for defendants ReconTrust Company,
N.A.; Bank of America, N.A.; The Bank of New York Mellon;
and Deutsche Bank National Trust Company. With him on
the brief were Steven A. Ellis, Washing ton DC, and Thomas
W. Sondag, Pilar C. French, and Peter D. Hawkes, Lane
Powell PC, Portland.
  Rolf C. Moan, Assistant Attorney General, Ellen F.
Rosenblum, Attorney General, and Anna M. Joyce, Solicitor
General, filed a brief on behalf of amicus curiae State of
Oregon.
    Nanina D. Takla, Law Office of Phil Goldsmith, Portland,
filed a brief on behalf of amicus curiae Oregon Trial Lawyers
Association.
   Sara Kobak, W. Michael Gillette, and Jordan Silk,
Schwabe, Williamson & Wyatt, PC, Portland, filed a brief on
behalf of amicus curiae Oregon Land Title Association.
   Thomas W. Brown, Thomas M. Christ, and Robert E.
Sabido, Cosgrave Vergeer Kester LLP, Portland, filed a brief
on behalf of amici curiae Mortgate Bankers Association,
Oregon Bankers Association, and Independent Community
Banks of Oregon.
   BREWER, J.
   Certified questions answered.
    Kistler, J., concurred in part and dissented in part, and
filed an opinion in which Balmer, C. J., joined.
   In four separate cases, home loan borrowers brought actions in state court
against the Mortgage Electronic Registration System, Inc. (MERS) and other
Cite as 353 Or 668 (2013)	671

entitles that were attempting to use the nonjudicial foreclosure procedures of the
Oregon Trust Deed Act (OTDA), ORS 86.705 to ORS 86.795, to foreclose the trust
deeds securing plaintiffs’ home loans. In each case, plaintiffs sought to enjoin
the foreclosure on the ground that a condition for nonjudicial foreclosure set out
in ORS 86.735(1)—that any assignments of the trust deed by the “beneficiary”
be recorded in the relevant county real property records—had not been satisfied.
Defendants removed the cases to federal court and then filed motions to dismiss
under FRCP 12(b)(6), arguing that MERS was the lawful beneficiary under
the trust deeds and that all assignments of the trust deeds by MERS had been
recorded. Uncertain as whether MERS could be deemed the “beneficiary” of the
trust deeds in question under the OTDA, and, if not, what role MERS could play
under the statute, the United States District Court certified four questions.
Held: (1) For purposes of ORS 86.735(1), the “beneficiary” of a trust deed is the
lender to whom the obligation that the trust deed secures is owed or the lender’s
successor in interest, and an entity like MERS, which is not the lender of the
lender’s successor in interest, may not be the “beneficiary” in a trust deed; (2)
A provision in the trust deed stating that, if necessary to comply with law or
custom, MERS has the right to exercise interests granted in the trust deed to the
lender, does not make MERS eligible to serve as the trust deed’s “beneficiary”;
(3) ORS 86.735(1) does not require recordation of “assignments” of the trust deed
that occur by operation of law as a result of the transfer of the promissory note
or other obligation that the trust deed secures; and (4) Because MERS cannot be
a trust deed’s “beneficiary” within the meaning of the OTDA, it cannot hold and
transfer legal title to the trust deed to a successor as nominee for the lender, but,
depending on the facts of the particular case, it may have authority to do so as
the true beneficiary’s agent.
    Certified questions answered.
672	                             Brandrup v. ReconTrust Co.

	       BREWER, J.

	       These cases come before this court on four certified
questions of law from the United States District Court for
the District of Oregon. See Brandrup v. ReconTrust Co., 352
Or 320, 287 P3d 423 (2012) (accepting certified questions);
ORS 28.200 to 28.255 (providing procedure for certifying
questions to the Oregon Supreme Court and authorizing
court to answer certified questions). The questions all are
concerned with a practice that has arisen in the home
mortgage industry in the last twenty years—that of drafting
mortgages and trust deeds so that a certain Delaware
corporation, Mortgage Electronic Registration Systems,
Inc. (MERS), rather than the lender, is identified as the
security instrument’s “mortgagee” or “beneficiary.” That
practice allows lenders and other entities dealing in home
loans to track their transactions in a database maintained
by MERS. In Oregon, the practice has come under scrutiny
in a number of foreclosure cases arising under the Oregon
Trust Deed Act (OTDA), ORS 86.705 to ORS 86.795.

	        As will be explained more fully below, the OTDA
provides an alternative to the traditional judicial foreclosure
process that is available only when the home loan is secured
by a trust deed, and, even then, only when certain conditions
are satisfied. One condition for foreclosing under the OTDA
is that “any assignments” of the trust deed by the trust deed
“beneficiary” be recorded in the real property records of the
county where the encumbered property is situated. ORS
86.735(1). Some homeowners threatened with foreclosure
under the OTDA have recognized that, although the
original lenders transferred their interests to other parties,
the changes in beneficial ownership were not recorded in the
real property records of the counties where their properties
are situated. Those homeowners have resisted foreclosure
under the OTDA on the ground that the transfers were
not recorded. They argue, inter alia, that ORS 86.735(1)
requires the recording of any assignment of a trust deed by
the owner of the beneficial interest in the trust deed and that
the identification of MERS as the trust deed “beneficiary” is
ineffective.
Cite as 353 Or 668 (2013)	673

	         Some cases filed in Oregon state courts that have
raised these issues have been removed to federal court,
and the judges within the District of Oregon have used
differing analyses and reached differing conclusions.
See, e.g., Sovereign v. Deutsche Bank, 856 F Supp 2d 1203
(D Or 2012); James v. ReconTrust Co., 845 F Supp 2d 1145
(D Or 2012); Reeves v. ReconTrust Co., 846 F Supp 2d 1149
(D Or 2012); Beyer v. Bank of America, 800 F Supp 2d 1157
(D Or 2011). Recognizing that the issues turn on the proper
construction of Oregon statutes and that this court is the
ultimate arbiter of such matters, the district court in these
cases certified the following questions to this court:
   	 Certified Question No. 1:  May an entity, such as
   MERS, that is neither a lender nor successor to a lender,
   be a ‘beneficiary’ as that term is used in the Oregon Trust
   Deed Act?
   	 Certified Question No. 2:  May MERS be designated as
   beneficiary under the Oregon Trust Deed Act where the
   trust deed provides that MERS “holds only legal title to the
   interests granted by Borrower in this Security Instrument,
   but, if necessary to comply with law or custom, MERS (as
   nominee for Lender and Lender’s successors and assigns)
   has the right: to exercise any or all of those interests”?
   	 Certified Question No. 3:  Does the transfer of a
   promissory note from the lender to a successor result in
   an automatic assignment of the securing trust deed that
   must be recorded prior to the commencement of nonjudicial
   foreclosure proceedings under ORS 86.735(1)?
   	 Certified Question No 4:  Does the Oregon Trust Deed
   Act allow MERS to retain and transfer legal title to a trust
   deed as nominee for the lender, after the note secured by
   the trust deed is transferred from the lender to a successor
   or series of successors?
We accepted the district court’s certification and allowed
the parties in the federal cases to present their views. We
answer those questions—in two instances as reframed—as
follows:
    (1)  “No.” For purposes of ORS 86.735(1), the
         “beneficiary” is the lender to whom the obligation
         that the trust deed secures is owed or the lender’s
674	                             Brandrup v. ReconTrust Co.

       successor in interest. Thus, an entity like MERS,
       which is not a lender, may not be a trust deed’s
       “beneficiary,” unless it is a lender’s successor in
       interest.
   (2)  We reframe the second question as follows:
       Is MERS eligible to serve as beneficiary under the
       Oregon Trust Deed Act where the trust deed provides
       that MERS “holds only legal title to the interests
       granted by Borrower in this Security Instrument,
       but, if necessary to comply with law or custom, MERS
       (as nominee for Lender and Lender’s successors and
       assigns) has the right: to exercise any or all of those
       interests”?
       Answer:  “No.” A “beneficiary” for purposes of the
       OTDA is the person to whom the obligation that the
       trust deed secures is owed. At the time of origination,
       that person is the lender. The trust deeds in these
       cases designate the lender as the beneficiary, when
       they provide: “This Security Instrument secures
       to Lender: (i) the repayment of the loan, and all
       renewals, extensions and modifications of the note;
       and (ii) the performance of borrower’s covenants and
       agreements under this security instrument and the
       note.” Because the provision that MERS “holds only
       legal title to the interests granted by Borrower in this
       Security Instrument, but, if necessary to comply with
       law or custom, MERS *  * has the right to exercise
                                   * 
       any or all of those interests,” does not convey to MERS
       the beneficial right to repayment, the inclusion of that
       provision does not alter the trust deed’s designation of
       the lender as the “beneficiary” or make MERS eligible
       to serve in that capacity.
   (3)  “No.” ORS 86.735(1) does not require recordation
        of “assignments” of a trust deed by operation of
        law that result from the transfer of the secured
        obligation.
   (4)  We answer the question, as reframed below, in
        two parts:
       (4)(a)  “Does the Oregon Trust Deed Act allow
       MERS to hold and transfer legal title to a trust deed
       as nominee for the lender, after the note secured by
Cite as 353 Or 668 (2013)	675

        the trust deed is transferred from the lender to a
        successor or series of successors?”
        Answer:  “No.” For purposes of the OTDA, the
        only pertinent interests in the trust deed are the
        beneficial interest of the beneficiary and the legal
        interest of the trustee. MERS holds neither of those
        interests in these cases, and, therefore, it cannot hold
        or transfer legal title to the trust deed. For purposes
        of our answer to the first part of the fourth certified
        question, it is immaterial whether the note secured
        by the trust deed has previously been “transferred
        from the lender to a successor or series of successors.”
        (4)(b)  “Does MERS nevertheless have authority as
        an agent for the original lender and its successors in
        interest to act on their behalves with respect to the
        transfer of the beneficial interest in the trust deed or
        the nonjudicial foreclosure process?”
        Answer:  The power to transfer the beneficial
        interest in a trust deed or to foreclose it follows the
        beneficial interest in the trust deed. The beneficiary
        or its successor in interest holds those rights. MERS’s
        authority, if any, to perform any act in the foreclosure
        process therefore must derive from the original
        beneficiary and its successors in interest. We are
        unable to determine the existence, scope, or extent of
        any such authority on the record before us.
As a preface to our explanation of those answers, we set out
the following legal and factual background.
                     I. BACKGROUND
A.  Mortgages, Trust Deeds, and the Oregon Trust Deed Act
	        When a person borrows money to purchase a home,
in Oregon as elsewhere, the loan usually is memorialized
in a promissory note that contains the borrower’s written,
unconditional promise to pay certain sums at a specified time
or times. Generally, the borrower and lender also enter into
a separately-memorialized security agreement—a mortgage
or, more commonly in Oregon, a trust deed. See generally
Grant Nelson and Dale Whitman, Real Estate Finance Law
§§ 2.1, 5.27, 5.28 (5th ed 2007); Joseph L. Dunne, Enforcing
the Oregon Trust Deed Act, 49 Willamette L Rev 77, 81-85
676	                             Brandrup v. ReconTrust Co.

(2012). Oregon subscribes to the “lien theory,” rather than
the “title theory,” of mortgages. Under the title theory, the
borrower conveys actual title to the burdened property
to the lender to secure the obligation to repay. Under the
lien theory, the borrower merely conveys a “right, upon
condition broken, to have the mortgage foreclosed and the
mortgaged property sold to satisfy [the underlying debt].”
Schleef v. Purdy, 107 Or 71, 78, 214 P 137 (1923). Thus, in
the traditional security arrangement—the mortgage—the
borrower conveys to the lender a lien on the property being
purchased, to secure the promise to repay that is contained
in a promissory note. If the borrower defaults on the note,
the lender, or the lender’s successor in interest, may exercise
its right to sell the property to satisfy the obligation, but it
must do so by bringing a judicial action against the borrower.
Id. at 75-79; ORS 88.010 (except as otherwise provided by
law, lien upon real property shall be foreclosed by a suit).
	        The OTDA, Or Laws 1959, ch 625, codified at ORS
86.705 to ORS 86.795, was enacted in 1959 to provide an
alternative to the judicial foreclosure process. Ronald Brady
Tippetts, Note, Mortages—Trust Deeds in Oregon, 44 Or
L Rev 149, 149-50 (1965). That nonjudicial alternative is
available when the parties use a trust deed to secure the
loan. A trust deed is a deed executed under the OTDA that
“conveys an interest in real property to a trustee in trust
to secure the performance of an obligation the grantor or
other person named in the deed owes to a beneficiary.” ORS
86.705(7). The OTDA permits the trustee appointed under a
trust deed to advertise and sell the property to the highest
bidder without judicial involvement. ORS 86.710; ORS
86.755. Like a mortgage, a trust deed creates a lien on real
property to secure an underlying obligation in the event of
a default. See ORS 86.705(7); see also Sam Paulsen Masonry
v. Higley, 276 Or 1071, 1075, 557 P2d 676 (1976) (mortgage
or trust deed creates only lien on real property). Indeed, a
trust deed creates two distinct interests—a legal interest
and a beneficial interest. First, a trust deed “conveys an
interest in real property to a trustee in trust to secure the
performance of an obligation.” ORS 86.705(7). That legal
interest includes the power to sell the obligated property
in the manner prescribed in the statute on the grantor’s
Cite as 353 Or 668 (2013)	677

default. ORS 86.710. However, if the trustee utilizes its
power of sale, the proceeds of the sale, after expenses, must
be applied “to the obligation secured by the trust deed”—
that is, to satisfy the obligation that the borrower owes to
the beneficiary. ORS 86.765(2). Accordingly, the trustee
holds and exercises its legal interest in the encumbered
property for the benefit of the trust deed’s “beneficiary”—the
person “named or otherwise designated in [the] trust deed
as the person for whose benefit [the] trust deed is given.”
ORS 86.705(1). The second interest that is created by a trust
deed—the beneficial or equitable interest in the lien granted
therein—thus is held by the beneficiary. That interest is the
security for the performance of the obligation that is owed to
the beneficiary. ORS 86.705(7).

	        A trustee may conduct a nonjudicial foreclosure
sale only when certain conditions are satisfied. See ORS
86.735 (setting out conditions). Those conditions include:
(1) recording of “[t]he trust deed, any assignments of the
trust deed by the trustee or the beneficiary and any
appointment of a successor trustee *  * in the mortgage
                                         * 
records of the counties in which the property described in
the deed is situated,” ORS 86.735(1); (2) a default on the
obligation, “the performance of which is secured by the trust
deed,” ORS 86.735(2); (3) recording of a notice of default
containing the trustee’s or beneficiary’s election to sell the
property to satisfy the obligation, ORS 86.735(3); and (4) the
absence of any pending or completed action for recovery of
the debt, with limited exceptions. See, e.g., ORS 86.735(4).

	         In addition to those conditions, the OTDA prescribes
notice requirements that protect trust deed grantors from
unauthorized nonjudicial foreclosures and sales of property.
Among other things, a trustee is required to provide to
the grantor and other interested parties at least 120 days’
advance notice of the trustee’s sale. ORS 86.740(1). Although
judicial involvement is not required to complete a foreclosure
by advertisement and sale, the 120-day advance notice
period gives a grantor time to seek judicial intervention
in certain circumstances, as plaintiffs in these cases have
done.
678	                                       Brandrup v. ReconTrust Co.

	        The grantor has a right to cure the default at any
time up to five days before the date last set for the sale. ORS
86.753. If the trustee has complied with the statutory notice
requirements and the default is not cured, the trustee may
sell the property at a public auction to the highest bidder
without judicial oversight. ORS 86.755. In contrast to the
judicial foreclosure process, a grantor has no statutory
right to redeem the property after a completed trustee’s
sale. Compare ORS 88.080 (providing right of redemption
after sale) with ORS 86.770(1) (trustee’s sale forecloses and
terminates interests in property of any person to whom
required notice of the sale was given). After a trustee’s sale,
the trustee must execute and deliver a trustee’s deed to the
purchaser, which must recite details of the foreclosure. ORS
86.775. If the trustee’s deed is recorded in the pertinent
county records, the facts recited in the deed are considered
prima facie evidence of the truth of the matters set forth
therein, and are conclusive in favor of a purchaser for value
who relies on them in good faith. ORS 86.780.
	        Of course, only a small portion of the property
transactions involving trust deeds end in foreclosure. If the
borrower repays the loan secured by the trust deed in full, the
trustee must “reconvey the estate of real property described
in the trust deed” (that is, release the lien on the property)
to the borrower, ORS 86.720, and that reconveyance may be
publicly recorded in the pertinent real property records.
B.  Assignment and Recording of Trust Deeds
	        Mortgages or trust deeds may be transferred in a
variety of ways. By statute, mortgages may be “assigned by
an instrument in writing,” and such written assignments
may be recorded in the pertinent real property records. ORS
86.060 (“mortgages may be assigned by an instrument in
writing * * * and recorded in the records of mortgages of the
county where the land is situated”).1 But mortgages also have
been held to “follow” the promissory notes that they secure so
that, by operation of law, the sale or transfer of a promissory

	1
      Although that statute initially was enacted with mortgages in mind, it
applies equally to trust deeds. See ORS 86.715 (“a trust deed is deemed to be a
mortgage on real property and is subject to all laws relating to mortgages on real
property except to the extent that such laws are inconsistent with [the OTDA]”).
Cite as 353 Or 668 (2013)	679

note effects an equitable transfer of the mortgage that
secures that note. Bamberger v. Geiser, 24 Or 203, 206-07,
33 P 609 (1893) (“where a debt is secured by mortgage,
the debt is the principal and the mortgage is the incident,
and * * * an assignment of the debt is an assignment of the
mortgage”); Barringer v. Loder, 47 Or 223, 229, 81 P 778
(1905) (same).2
	        Although the recordation of a mortgage or trust
deed assignment generally is not required to make the
transfer legally effective between the parties, it is necessary
and desirable for protecting an assignee’s interest under the
security instrument against a purchaser in good faith for
valuable consideration. See Willamette Col. & Credit Serv. v.
Gray, 157 Or 77, 83, 70 P2d 39 (1937) (assignee of mortgage
was not obliged to take and record written assignment to
acquire title as between immediate parties but was required
to do so to maintain lien against innocent purchaser); see
also ORS 93.640 (every conveyance, deed, or assignment
affecting an interest in real property which is not recorded as
provided by law is void as against any subsequent purchaser
in good faith for valuable consideration). The recordation
of a trust deed assignment is necessary for an additional
reason: As described above, 353 Or at 677, the trust deed
and “any assignments of the trust deed by the trustee or the
beneficiary” must be recorded in the relevant land records
before the nonjudicial foreclosure procedure set out at ORS
86.740 - 86.755 may be invoked. ORS 86.735(1).
C.  The MERS Corporation
	        MERS is a creature of the real estate finance
industry. In the mid-1990’s, large players in the industry,
including the Federal National Mortgage Association
(Fannie Mae) and the Federal Home Loan Mortgage
Corporation (Freddie Mac), decided to create a database
that would electronically track ownership in secured real
estate loans as they were bought and sold in a secondary
market, generally in packages now known as mortgage-
backed securities. R. K. Arnold, Yes, There is Life on MERS,
11 Prob & Prop 33, 33-34 (1997). They created MERSCorp
	2
       Again, that principle applies equally when the promissory note is secured by
a trust deed; the trust deed follows the note by operation of law.
680	                              Brandrup v. ReconTrust Co.

Holdings, a “member-based organization made up of
thousands of lenders, servicers, sub-servicers, investors and
government institutions.” See MERSCORP Holdings, Inc.,
http://www.mersinc.org/about-us/faq (accessed May 22,
2013). The primary product of MERSCorp Holdings was
and is the “MERS System,” a “national electronic database
that tracks changes in mortgage servicing and beneficial
ownership interests in loans secured by residential real
estate.” Id.
	        But there is another significant aspect of MERS;
that entity serves as the designated mortgagee or beneficiary,
as the nominee of the lender, for all mortgages and trust
deeds registered in the MERS System. Id. Christopher L.
Peterson, Foreclosure, Subprime Lending, and the Mortgage
Electronic Registration System, 78 U Cincinnati L Rev 1359,
1361-62 (2009). MERS, however, does not make, service, or
invest in loans. Id. at 1371.
D.  The Trust Deeds and Plaintiffs’ Challenges
	        The certified questions that are before this court
arise out of four separate actions challenging a trustee’s
attempt to nonjudicially foreclose a trust deed securing
residential property. In each case, homeowners (collectively,
“plaintiffs”) financed the purchase of a residence in Oregon
with a loan from a lender that is a member of MERS. In each
case, the homeowners signed (1) a promissory note pledging
to repay the money borrowed, plus interest, according to a
prescribed schedule and by a specified date, and (2) a “Deed
of Trust,” granting to a named trustee the property they
had purchased with the loan, “in trust, with power of sale,”
to secure the payment of the promissory note and other
related promises.
	        Except for the names and property descriptions, the
trust deeds in the four cases are identical. In a “definition”
section, each trust deed identifies the “Borrower,” “Lender”
and “Trustee” by name, and then sets out the following
definition of “MERS”:
   	 “  ‘MERS’ is Mortgage Electronic Registration System,
   Inc. MERS is a separate corporation that is acting solely as
   a nominee for Lender and Lender’s successors and assigns.
   MERS is the beneficiary under this Security Instrument.”
Cite as 353 Or 668 (2013)	681

In a section entitled “Transfer of Rights in the Property,” the
trust deed states:
   	“The beneficiary of this Security Instrument is MERS
   (solely as nominee for Lender and Lender’s successors and
   assigns) and the successors and assigns of MERS. This
   Security Instrument secures to Lender: (i) the repayment of
   the Loan, and all renewals, extensions and modifications of
   the Note, and (ii) the performance of Borrower’s covenants
   and agreements under this Security Instrument and the
   Note. For this purpose, Borrower irrevocably grants
   and conveys to Trustee, in trust, with power of sale, the
   following described property *  *, [t]ogether with all the
                                      * 
   improvements now or hereafter erected on the property, and
   all easements, appurtenances, and fixtures now or hereafter
   a part of the property. All replacements and additions
   shall also be covered by this Security Instrument. All of
   the foregoing is referred to in this Security Instrument as
   the Property. Borrower understands and agrees that MERS
   holds only legal title to the interests granted by Borrower in
   this Security Instrument, but, if necessary to comply with
   law or custom, MERS (as nominee for Lender and Lender’s
   successors and assigns) has the right: to exercise any or all
   of those interests, including, but not limited to, the right
   to foreclose and sell the Property, and to take any action
   required of Lender including, but not limited to, releasing
   and canceling this Security Instrument.
(Emphases added.)
	        Those provisions appear to turn the traditional three-
party trust deed arrangement—debtor/grantor, trustee, and
lender/beneficiary—into a four-party arrangement, with
the functional role of the beneficiary being split between two
entities. Although the benefit of the trust deed is reserved
to the “Lender” (because the trust deed “secures to the
Lender” the obligations of repayment and performance of
other covenants), MERS purports to be the beneficiary “as
nominee for Lender and Lender’s successors and assigns.”
	       Plaintiffs in all four cases signed the promissory
notes and trust deeds as described, and, after a period of
years, allegedly defaulted on their loans. Following each
default, MERS executed a written assignment of the
trust deed to the reputed ultimate successor in interest of
the original lender and recorded that assignment in the
682	                               Brandrup v. ReconTrust Co.

pertinent real property records. Each of those assignees then
appointed a new trustee, ReconTrust Company, N.A., and
that assignment also was recorded. Thereafter, ReconTrust,
as trustee, commenced the process of nonjudicial foreclosure
under each trust deed, issuing notices of the grantor’s default
and the trustee’s election to sell.
	        In all four cases, plaintiffs brought an action in
state court against ReconTrust, MERS, and the reputed
ultimate successor in interest of their original lender,
seeking to enjoin the nonjudicial foreclosure proceeding
on a number of grounds, including that (1) a condition for
nonjudicial foreclosure had not been satisfied—specifically,
the requirement in ORS 86.735(1) that any assignments of
the trust deed by the “beneficiary” be publicly recorded in the
pertinent real property records; and (2) MERS’s purported
assignment of the trust deed to the reputed ultimate
successor in interest was ineffective, because, at the time of
the purported assignment, “the principal for whom MERS
purported to act as ‘beneficiary’ did not hold plaintiff’s loan
at that date.” Defendants removed the cases to federal court,
and then filed motions to dismiss under FRCP 12 (b)(6),
arguing that MERS was the lawful beneficiary under the
trust deeds, that all assignments of the trust deeds by the
named “beneficiary,” MERS, had been recorded, and that
ORS 86.735(1) did not require assignments of the trust
deeds by the lenders to be recorded. The federal district
court certified the questions set out above to this court. We
consider the questions in order.
            II.  FIRST CERTIFIED QUESTION
   	 “May an entity, such as MERS, that is neither a lender
   nor successor to a lender, be a ‘beneficiary’ as that term is
   used in the Oregon Trust Deed Act?”

	        This question is one of statutory construction, which
we approach using the methodology described in State v.
Gaines, 346 Or 160, 206 P3d 1042 (2009). We focus first on
the text, context, and any legislative history brought to our
attention by the parties that we find useful, and proceed to
general maxims of statutory construction if the legislature’s
Cite as 353 Or 668 (2013)	683

intent remains obscure. Id. at 171-72. The pertinent text is
the definition of “beneficiary” that appears in ORS 86.705:
    	 “As used in ORS 86.705 to 86.795 [that is, the Oregon
    Trust Deed Act]:
    	   “* * * * *
    	 “(2)  ‘Beneficiary’ means a person named or otherwise
    designated in a trust deed as the person for whose benefit a
    trust deed is given, or the person’s successor in interest, and
    who is not the trustee unless the beneficiary is qualified to
    be a trustee under ORS 86.790(1)(d).” 3
There is no dispute about the meaning of the last clause.
Rather, the parties square off over the meaning of the
requirements that the person (1) be “named or otherwise
designated in [the] trust deed,” (2) “as the person for whose
benefit the trust deed is given.” Taking the latter phrase
first, the “benefit” of a trust deed is the security it provides
with respect to an obligation owed by the grantor to the
beneficiary. That is made clear in many of the surrounding
statutes. For example, as noted, the term “trust deed” is
defined as “a deed executed in conformity with ORS 86.705 to
86.795 that conveys an interest in real property to a trustee
in trust to secure the performance of an obligation the grantor
or other person named in the deed owes to a beneficiary.” ORS
86.705(7) (emphasis added). Similarly, “grantor” is defined
as “the person that conveys an interest in real property by a
trust deed as security for the performance of an obligation.”
ORS 86.705(4) (emphasis added). Finally, ORS 86.710, which
generally describes the power of a trustee to nonjudicially
foreclose, begins with a general description of a trust deed:
“Transfers in trust of an interest in real property may be
made to secure the performance of an obligation of a grantor,
or any other person named in the deed, to a beneficiary.”
	3
        We use the current version of the statute, which is numbered differently but
does not otherwise vary materially from the version in effect when the parties
signed the trust deeds. That version, ORS 86.705 (2005), provided:
    	    “As used in ORS 86.705 - 86.795, unless the context requires otherwise;
    	 “(1) ‘Beneficiary’ means the person named or otherwise designated in a
    trust deed as the person for whose benefit a trust deed is given, or the person’s
    successor in interest, and who shall not be the trustee unless the beneficiary is
    qualified to be a trustee under ORS 86.790(1)(d).”
(Differences in italics.)
684	                              Brandrup v. ReconTrust Co.

(Emphasis added.) Thus, the person “for whose benefit the
trust deed is given” is the person to whom the grantor owes
an obligation, the performance of which the trust deed
secures.

	         That analysis, however, speaks only to the second
half of the wording of the definition. Plaintiffs suggest that
the initial phrase “the person named or otherwise designated
as” means that the trust deed must identify (name or
otherwise designate) the person who meets the definition of
“beneficiary” as that term is used in the statute. Defendants
contend, to the contrary, that the legislature used that phrase
to signify that the parties to the trust deed could agree to
“name” or “designate” whomever they chose to serve “as”
beneficiary—and that, for purposes of ORS 86.705(2), the
“beneficiary” would be the person so designated. Thus, as
defendants conceive it, designation of a beneficiary is purely
a matter of contract. Plaintiffs’ contrary interpretation,
defendants assert, essentially turns the initial phrase of the
definition into surplusage, violating a fundamental principle
of statutory construction set out at ORS 174.010; that is, “not
* * * to omit what has been inserted.”

	        We do not agree that plaintiffs’ reading removes the
phrase “named or otherwise designated as” from the statute.
As noted above, plaintiffs read the statutory definition as
providing that, in addition to being the person “for whose
benefit the trust deed is given,” the beneficiary must be
“named or otherwise designated” as such in the trust deed.
That reading uses all of the words of the statute. Indeed, we
find plaintiffs’ reading of the definition to be more compelling,
on a purely textual level, than defendants’. If defendant’s
reading were correct, then anyone—even a person with no
connection to or interest in the transaction at all—could be
designated in the agreement. If the legislature had intended
“beneficiary” to have the circular meaning that defendants
suggest—that “beneficiary” means whomever the trust deed
names as the “beneficiary”—it would have had no reason to
include any description of the beneficiary’s functional role
in the trust arrangement. The fact that the statute does
include such a description (“the person for whose benefit the
trust deed is given”) strongly suggests that the legislature
Cite as 353 Or 668 (2013)	685

intended to define “beneficiar[ies]” by their functional role,
not their designation. Stated differently, by including such
a functional description, it is apparent that the legislature
intended that the beneficiary of the trust deed be the person
to whom the obligation that the trust deed secures is owed.
	        As discussed, in a typical residential trust deed
transaction, the obligation secured by the trust deed is
memorialized in a promissory note that contains a borrower’s
promise to repay a home loan to a lender. At inception, the
lender is the person who is entitled to repayment of the note
and, thus, functionally is “the person for whose benefit the
trust deed is given.” That person’s “successor in interest,”
whom ORS 86.705(2) also recognizes as a beneficiary, is a
person who succeeds to the lender’s rights.
	        Defendants contend that another provision of the
OTDA, ORS 86.720(3), undermines that construction of
ORS 86.705(2). ORS 86.720 addresses the circumstance
in which the obligation secured by a trust deed has been
satisfied, but either the beneficiary or trustee has failed or
refused to release the trust deed. In such a circumstance,
where a title insurance company or insurance producer has
satisfied the obligation through an escrow, ORS 86.720(1)
authorizes the insurer, in a backup role, to issue and record
a release of the trust deed to clear title. In that context, ORS
86.720(3) provides:
   	 “Prior to the issuance and recording of a release [of the
   lien upon performance of the obligation secured by the trust
   deed], the title insurance company or insurance producer
   shall give notice of the intention to record a release of trust
   deed to the beneficiary of record and, if different, the party
   to whom the full satisfaction was made.”
(Emphasis added.)
	       Defendants assert that the emphasized text shows
that the legislature understood that the “beneficiary” need
not be the lender or the lender’s successor in interest. We
do not agree that the statutory text necessarily—or even
probably—bears such a construction. It is equally, if not
more plausible, to conclude that the phrase “if different, the
party to whom the full satisfaction was made,” was meant
instead to acknowledge the circumstance where a lender’s
686	                                      Brandrup v. ReconTrust Co.

successor in interest is not the beneficiary “of record,” but is
entitled to repayment of the underlying obligation. Ironically,
that is precisely the circumstance that defendants assert
permissibly occurred in these cases and that is the subject
of the third certified question discussed below. When the
statute is viewed in that light, it reinforces the conclusion
that the beneficiary is the lender or the lender’s successor in
interest. In short, ORS 86.720(3) does not furnish persuasive
context that supports defendants’ proposed meaning of the
term “beneficiary” under the OTDA.
	         Defendants next contend that the statutory
meaning of “beneficiary” must be interpreted in the context
of common law principles of agency, freedom of contract,
and commercial law. Defendants point to case law showing
that Oregon recognizes that an agent, even one without a
pecuniary interest, may engage in land transactions and
hold title on behalf of a principal. See, e.g., Halleck v. Halleck
et al., 216 Or 23, 38, 337 P2d 330 (1959) (“        ‘Conveyances
of lands *  * may be made by deed, signed by the person
            * 
* * * or by his lawful agent’ ”) (quoting former ORS 93.010));
Bowns v. Bowns, 184 Or 603, 613, 200 P2d 586 (1948) (estate
or interest in real property may be transferred by one’s
“ ‘lawful agent, under written authority’  (quoting former
                                               ”)
ORS 93.020)); Kern v. Hotaling, 27 Or 205, 207, 40 P 168
(1895) (note and mortgage executed to member of brokerage
firm as agent for principal).4 Defendants also point to the
“bedrock” principle that “contracts, when entered into freely
and voluntarily, shall be held sacred and shall be enforced
by courts,” unless contrary to some “overpowering rule
of public policy.” McDonnal and McDonnal, 293 Or 772,
779, 652 P2d 1247 (1982) (quoting Feves v. Feves, 198 Or
151, 159-60, 254 P2d 694 (1953)). Defendants assert that
proper consideration of those common law principles in
interpreting the trust deed statutes supports their reading
that ORS 86.735(1) allows someone other than an obligee
to be the “beneficiary,” either because the parties have
freely and voluntarily agreed to designate someone else as
the beneficiary or because the obligee has chosen to have
	4
       Defendants also cite a federal case, In re Cushman Bakery, 526 F2d 23, 30
(1st Cir 1975) cert den, 425 US 937 (1976) for the proposition that a lien may be
recorded in the name of a nominee.
Cite as 353 Or 668 (2013)	687

someone act as its agent or nominee. More specifically—
although the premise is implicit—the core of defendants’
“freedom of contract” argument appears to be that, although
MERS has no right to repayment of the notes in these
cases, it nevertheless may be designated by contract as the
beneficiary for other functions, in particular those functions
relating to the control of the foreclosure process.

	         We disagree. The resolution of this question does not
hinge on the parties’ intent; rather, it depends on legislative
intent. That is, the OTDA authorizes nonjudicial foreclosure
only when certain statutory requirements are met. In these
circumstances, the meaning of “beneficiary,” as used in
ORS 86.735(1), is determined by statute, and that meaning
is incorporated into, and cannot be altered by, the party’s
agreement. See, e.g. Ocean A. & G. Corp., Ltd. v. Albina
M. I. Wks., 122 Or 615, 617, 260 P 229 (1927) (“law of the
land applicable thereto is a part of every valid contract”);
see also, R. Lord, 11 Williston on Contracts § 30:24 (4th ed
1999) (“[i]ncorporation of existing law may act to supersede
inconsistent clauses purporting to define the terms of the
agreement. For instance, where a statute regulates the
amount the government is to pay for a particular service, the
statute controls despite a contract between the government
and the provider of the service agreeing to a lower rate.”). If
the legislature had intended to make the parties’ agreement
paramount over the statute in this regard, it could have, and
likely would have, included an “unless otherwise agreed”
caveat, as it has in some statutes. See, e.g., ORS 72.3070
(“Unless otherwise agreed, all goods called for by a contract
for sale must be tendered in a single delivery * * *.”). But, in
light of the structure of the OTDA, it is unsurprising that it
did not do so.

	        The OTDA contemplates a unitary beneficiary
status, so that the person with the right to repayment of
the underlying obligation also controls the foreclosure
process. The interaction of a number of statutory provisions
demonstrates the point. For example, ORS 86.710 gives the
beneficiary the power to decide whether to foreclose judicially
or nonjudicially. Under ORS 86.720, the beneficiary must
request reconveyance after the secured obligation is satisfied.
688	                             Brandrup v. ReconTrust Co.

ORS 86.737(2)(b)(B) provides that notice to the grantor of a
foreclosure sale must include “a telephone number that will
allow the grantor access during regular business hours to
person-to-person consultation with an individual authorized
by the beneficiary to discuss the grantor’s payment and
loan term negotiation and modification.” In addition, under
ORS 86.745(1), a notice of sale must include the name of
the “beneficiary.” ORS 86.753(1) provides that the grantor
(and others) may cure a default before a foreclosure sale
by making payment, and paying costs and expenses “to
the beneficiary.” ORS 86.759(5) provides that statutory
requirements that the trustee provide default and cure-
related information to the grantor and others “do not affect
the duty of beneficiaries to provide information to grantors.”
And, significantly, it is the beneficiary alone who has
authority to appoint a successor trustee. ORS 86.790(3). In
sum, the integrated effect of those provisions presumes that
the collective rights and obligations that define beneficiary
status are functionally united; that is, the person entitled
to repayment of the secured obligation also controls the
foreclosure process.

	        That functional unity has longstanding roots in the
common law itself. A fundamental principle in mortgage law
holds that a foreclosing party must have the power to enforce
the underlying note. See United States Nat. Bank v. Holton,
99 Or 419, 429, 195 P 823 (1921) (“It has always been the
law of this state that the assignment of the note carries the
mortgage *  *. The assignment of a mortgage independent
             * 
of the debt which it is given to secure, is an unmeaning
ceremony.”). That concern underlies the standard doctrine
in judicial foreclosure proceedings that the foreclosing party
must provide proof that it has the power to enforce the note.
See generally Alan M. White, Losing the Paper—Mortgage
Assignments, Note Transfers and Consumer Protection, 24
Loy Consumer L Rev 468, 476-77 (2012) (collecting cases).

	       Neither can the statutory meaning of “beneficiary”
yield to an obligee’s decision to use another party as its
agent or nominee. Although the cases and statutes cited
by defendants show that a lawful agent can have broad
authority to act on a trust deed beneficiary’s behalf in regard
Cite as 353 Or 668 (2013)	689

to the exercise of rights under the trust deed, even to the
point of appearing on documents in the beneficiary’s stead,
the agent cannot become the “beneficiary” for purposes of a
statutory requirement that is defined, in part, by the status
of the “beneficiary.” To reinforce the point, the legislature, in
recent amendments to the OTDA, has plainly distinguished
between a beneficiary and its agents in the nonjudicial
foreclosure context. See, e.g., ORS 86.735(4) (requiring
either “the beneficiary or the beneficiary’s agent” to certify
compliance with statutory requirements as a condition of
nonjudicial foreclosure).5 Here, the “beneficiary” to which
ORS 86.735(1) refers must be “the person for whose benefit
the trust deed [was] given,” that is (as discussed), the person
to whom the obligation that the trust deed secures is owed
or that person’s successor in interest. By the terms of the
trust deeds at issue in these cases, those persons are the
lenders (“[t]his Security Instrument secures to Lender:
(i) the repayment of the Loan”) or their successors. Unless
the lenders have transferred such interests to their agents or
nominees, the latter persons cannot become “beneficiaries”
for purposes of the OTDA.6 7
	        In sum, our answer to the first question certified by
the district court is as follows: For purposes of ORS 86.735(1),
the “beneficiary” is the lender to whom the obligation that
the trust deed secures is owed or the lender’s successor in
interest. Thus, an entity like MERS, which is not a lender,
may not be a trust deed’s “beneficiary,” unless it is a lender’s
successor in interest.	

	5
        The 2012 legislature significantly amended the OTDA. The quoted wording
from ORS 86.735(4) was one of the amendments. Or Laws 2012, ch 112, § 6.
	6
       We discuss defendants’ other arguments pertaining to the law of agency,
including their argument that MERS, as the lender’s “nominee,” may hold “legal
title” to the lender’s rights under the trust deed, in our answer to the fourth
certified question.
	7
       Defendants also argue that the legislative history of the OTDA supports
their interpretation of the statute and have included portions of the legislative
history in support of that claim. Defendants’ theory is that, insofar as the legislative
history discloses that the legislature’s general purpose in enacting the OTDA was
to provide a simpler and more economical method of foreclosure to attract more
lenders to Oregon, an interpretation that permits the parties to contractually
appoint a beneficiary would advance that purpose. We do not find the proffered
history, or defendants’ theory of its relevance, to be helpful, and do not discuss it
further.
690	                                        Brandrup v. ReconTrust Co.

             III.  SECOND CERTIFIED QUESTION
    	 “Is MERS eligible to serve as beneficiary under the
    Oregon Trust Deed Act where the trust deed provides that
    MERS ‘holds only legal title to the interests granted by
    Borrower in this Security Instrument, but, if necessary to
    comply with law or custom, MERS (as nominee for Lender
    and Lender’s successors and assigns) has the right: to
    exercise any or all of those interests’?”

	        This question goes to defendants’ theory that,
under the OTDA, MERS is eligible to serve as “beneficiary”
of a trust deed in a role as the obligee’s agent or nominee.
The theory behind the question is: If ORS 86.705(2), in fact,
defines “beneficiary” in terms of a beneficiary’s function in
the trust arrangement, which function is defined, in turn, by
the beneficiary’s rights that are secured by the trust deed,
then an agent or nominee who has been delegated sufficient
rights should qualify as a beneficiary under the statute.
Defendants contend that the obligees that MERS serves,
as agent or nominee, have delegated to MERS sufficient
rights for that purpose. Because the more precise question
is whether MERS is eligible to serve as a beneficiary under
the OTDA, not whether it may be “designated” as such, we
amend the certified question and answer it accordingly.
	        Defendants argue, first, that by defining MERS as
the beneficiary “acting solely as a nominee for Lender and
Lender’s successors and assigns,” the trust deeds in these
cases clearly convey an intention that MERS act as the
lender’s or its successors’ agent. Defendants also contend
that MERS’s agreement with its members explicitly provides
that MERS will serve as the members’ common agent—
allowing MERS to act as agent or nominee for the initial
lender and any successors in interest who are members of
MERS.8 Finally, defendants point to wording in the trust
	8
        The MERS membership agreement is not in the record, but MERS asserts,
in its brief to this court, that the agreement provides that “MERS shall at all times
comply with the instruction of the beneficial owner of mortgage loans,” and that
it grants MERS authority to “execute important documents, foreclose and take all
other actions necessary to protect the interests of the noteholder.” Defendants also
note that other courts have determined, in cases in which the MERS membership
agreement was placed in the record, that the agreement spells out MERS’s duties
to its members in those terms. Neither defendants’ bare assertions nor the cases
Cite as 353 Or 668 (2013)	691

deeds that purports to authorize MERS to exercise all of the
lender’s rights under the trust deeds:
   “Borrower understands and agrees that MERS holds only
   legal title to the interests granted by Borrower in this
   Security Instrument, but, if necessary to comply with law
   or custom, MERS (as nominee for Lender and Lender’s
   successors and assigns) has the right: to exercise any or all
   of those interests, including, but not limited to, the right
   to foreclose and sell the Property, and to take any action
   required of Lender including, but not limited to, releasing
   and canceling this Security Instrument.”
Defendants argue that if MERS, as the obligee’s nominee,
must have some or all of the obligee’s rights to qualify as the
trust deed beneficiary for purposes of ORS 86.705(3), then
the broad delegation of power to MERS contained in the
quoted provision would be sufficient to make MERS eligble
to serve as the “beneficiary.”
	        It is unspoken, but evident, that the necessity to
which the above provision refers is the necessity of having
MERS be recognized as the trust deed beneficiary for
purposes of any requirement that must be satisfied before
the trust deed may be nonjudicially foreclosed. That the
provision imbues the word “necessary” with an unnatural
meaning, with the result that the provision is circular, does
not render the provision unenforceable, as plaintiffs seem
to suggest. We accept the provision in the way it apparently
was intended: It is triggered by any apparent deficiency in
MERS’s authority to serve as beneficiary, and, according
to defendants’ theory, results in the delegation to MERS of
any of the obligee’s rights or interests that MERS might be
required to have for that purpose.
	        The problem with defendants’ theory, however, is
that, while asserting MERS’s authority to exercise all of the
obligee’s rights and interests, the provision fails to speak
to the one interest that an entity must have to qualify as
a beneficiary under ORS 86.705(2). As discussed above,
353 Or at 689, the beneficiary under that definition is the
person to whom the obligation that the trust deed secures

cited provide a basis for this court to determine what the agreements actually
provide in the cases before the district court.
692	                             Brandrup v. ReconTrust Co.

is owed. Unless the “law or custom” provision transforms
MERS into such an obligee, it cannot transform MERS into
the “beneficiary” of the trust deed.
	         And it is clear that the “law or custom” provision
does not have that legal effect. The provision first states
that MERS holds “only legal title to the interests granted by
Borrower in this Security Instrument.” When the provision
thereafter states that MERS has the right “to exercise any
or all of those interests,” if necessary to comply with law or
custom, it refers to the interests “granted by the borrower in
this security instrument.” But the interests that are granted
by the grantor in a trust deed are different from the right
to repayment under a related promissory note. As discussed
above, 353 Or at 676, the grantor conveys two interests by
signing a trust deed: to the trustee, a legal interest in the
subject real property, which may be foreclosed upon the
obligor’s default on the underlying obligation; and to the
beneficiary, the beneficial counterpart to that legal interest.
In each of the four trust deeds that are at issue, the first
(legal) interest is conveyed in the following sentence in the
“Transfer of Rights in the Property” provision: “Borrower
irrevocably grants and conveys to Trustee, in trust, with
power of sale, the following described property.” That the
lender obtains the benefit of the legal interest that is granted
to the trustee is conveyed in the preceding sentence:
   “This Security Instrument secures to Lender: (i) the
   repayment of the Loan, and all renewals, extensions and
   modifications of the Note, and (ii) the performance of
   Borrower’s covenants and agreements under this Security
   Instrument and the Note.”
Thus, the interests and rights that were “granted by the
borrower under this security instrument” were only (1) a
legal interest in the property that the trust deed burdens, in
the form of a lien; and (2) an equitable or beneficial interest
in that lien.
	       In contrast, in these cases, the interest in the
secured obligation that a party must have to qualify as the
trust deed’s “beneficiary”—the obligation that the trust
deed secures—is the right to repayment of the obligation.
Although related to the above-mentioned interests that
Cite as 353 Or 668 (2013)	693

are granted in the trust deed by the grantor, that right to
repayment is not one of those interests. That is, the obligee’s
right to repayment is secured by the lien on the property
that the grantor grants in the trust deed, but that right
exists apart from the trust deed and is not “granted by the
borrower in the [trust deed].” It follows that, even if the
“law or custom” clause were triggered so that the right to
exercise “any or all” interests granted in the trust deed by
the borrower was delegated to MERS, MERS still would not
have an interest that would qualify it as the trust deed’s
beneficiary.9
	         To conclude: A “beneficiary” for purposes of the
OTDA is the person to whom the obligation that the trust
deed secures is owed. At the time of origination, that person
is the lender. The trust deeds in these cases designate the
lender as the beneficiary, when they provide: “This Security
Instrument secures to Lender: (i) the repayment of the
loan, and all renewals, extensions and modifications of
the note; and (ii) the performance of borrower’s covenants
and agreements under this security instrument and the
note.” Because the provision that MERS “holds only legal
title to the interests granted by Borrower in this Security
Instrument, but, if necessary to comply with law or custom,
MERS *  * has the right to exercise any or all of those
           * 
interests,” does not convey to MERS the beneficial right to
repayment of the secured obligation, the inclusion of that
provision does not alter the trust deed’s designation of the
lender as the “beneficiary” or make MERS eligible to serve
in that capacity.
                 IV.  THIRD CERTIFIED QUESTION
    	 “Does the transfer of a promissory note from the lender
    to a successor result in an automatic assignment of the
    securing trust deed that must be recorded prior to the

	9
       Moreover, the “law or custom” provision purports to delegate to MERS the
right “to exercise” any of the interests granted in the trust deed by the grantor;
it does not purport to actually convey those interests to MERS. Given that the
OTDA defines “beneficiary” in terms of an interest that the beneficiary has (the
right to payment that the trust deed secures), and not in terms of the interests
that the beneficiary does or may exercise, it is doubtful that conveying to MERS a
right “to exercise” the beneficiary’s interest could bring MERS within the statutory
definition.
694	                             Brandrup v. ReconTrust Co.

   commencement of nonjudicial foreclosure proceedings
   under ORS 86.735(1)?”
	        As we already have mentioned, 353 Or at 678-79,
Oregon law provides that the transfer of a promissory note
that is secured by a mortgage automatically effects, by
operation of law, an assignment of the mortgage. Because a
trust deed is a species of mortgage and is “subject to all laws
relating to mortgages on real property,” ORS 86.715, the
same principle applies to trust deeds: A trust deed follows
the promissory note that it secures. The third certified
question thus asks whether such assignments by operation
of law are included in the statutory requirement of ORS
86.735(1) that “any assignments of the trust deed by the * * *
beneficiary * * * [be] recorded” in the pertinent real property
records. If the answer to that question is “yes,” then the fact
that the promissory notes have been transferred without
corresponding recorded assignments of the trust deeds
would stand as a bar to nonjudicial foreclosure under ORS
86.735 in the cases before the federal court. Defendants
argue, however, that the term “assignments,” as used in
ORS 86.735(1), refers only to assignments of a trust deed
that are memorialized in a writing other than a writing
that may serve to transfer the promissory note. Therefore,
as defendants argue, the statute does not require that
assignments that result from the transfer of a promissory
note be recorded before a nonjudicial foreclosure can proceed.
The issue is (again) one of statutory construction, this time
focusing on the meaning of the phrase “any assignments” in
ORS 86.735(1).
	       The text is not conclusive. Although the term
“assignment” may carry a connotation of a written transfer
of the trust deed itself, it appears to be broad enough to
encompass any manner of transfer of the trust deed, such as
by operation of law. The first definition of the word “assign”
that appears in Webster’s Third New Int’l Dictionary 132
(unabridged ed 2002) reflects the narrow connotation: “to
transfer to another in writing.” However, other definitions
that appear in Webster’s, and those that appear in Black’s
Law Dictionary, do not refer to a writing. In any event,
the notion that a security interest may be transferred by
operation of law has a long and unchallenged history in this
Cite as 353 Or 668 (2013)	695

state, and the word “assignment” at times has been used
by this court in connection with that concept. See, e.g., First
National Bk. v. Jack Mathis Gen. Cont., 274 Or 315, 321, 546
P2d 754 (1976) (“assignment of a debt carries with it the
security for the debt”); Willamette Col. & Credit Serv., 157
Or at 81-82 (using term “assignment” to refer to “mortgage
follows the note” principle); Barringer, 47 Or at 229 (in
enacting statute, legislature “recognize[ed] the right * * * to
assign [a mortgage] by indorsement of the note”). In short,
the choice of the word “assignments” in ORS 86.735(1) does
not negate the possibility that the legislature intended to
include transfers of trust deeds that occur by operation of
law, without a separate writing.
	        The use of the expansive modifier “any” (“any
assignments”) is similarly inconclusive. Although it might
convey a specific legislative intent that any manner of
assignments, including those that occur by operation of law,
be included in the recordation requirement, it also might
simply refer to every “assignment” within the intended
(possibly narrower) meaning of that term.
	        The parties also debate the import of statutes
related to ORS 86.735(1) that have been offered as context
for interpreting that statute. Among others, they point to
ORS 86.110(1), which was in effect when the OTDA was
enacted,10 and which pertains to the discharge of record of a
mortgage:
    	 “(1)  Whenever a promissory note secured by mortgage
    on real property is transferred by indorsement without a
    formal assignment of the mortgage, and the mortgage is
    recorded, the mortgage, upon payment of the promissory
    note, may be discharged of record by the owner and
    holder of the promissory note making and filing with the
    appropriate recording officer a certificate *  * proving the
                                                   * 
    satisfaction of the mortgage, * * * that the owner and holder
    is the owner and holder of the note, * * * and that the note
    has been fully paid and proving that fact to the satisfaction
    of the recording officer.”

	10
       We set out the current version of ORS 86.110(1), which differs from the
version that was in effect in 1959 when ORS 86.735(1) was adopted. The differences
are slight and are not relevant to our analysis here.
696	                                      Brandrup v. ReconTrust Co.

(Emphasis added.) Defendants contend that the emphasized
wording shows that, although this court’s cases speak of
a transfer of a secured note by indorsement as assigning
an associated mortgage by operation of law, the legislature
has drawn a distinction between such “transfers” and
“assignments” of the mortgage. However, the emphasized
wording could support an alternative inference—that
“formal assignment” is only one form of “assignment,”
and that another occurs by operation of law when a note
is transferred.11 Because that alternative construction is at
least as plausible as defendants’ construction, we conclude
that ORS 86.110(1) is of little contextual help in our
interpretive endeavor.
	What does seem significant is that the recording
requirement in ORS 86.735 assumes the existence of an
assignment in recordable form and that the transfer of a
promissory note cannot serve that function. Because a
promissory note generally contains no description of real
property and does not transfer, encumber, or otherwise
affect the title to real property, it cannot be recorded in
land title records. See ORS 93.600 (real property shall be
described for recordation according to United States survey,
or by lots, blocks, etc.); ORS 93.610 (providing for separate
records for recording deeds and mortgages and “all other
real property interests”); ORS 93.630 (requiring index to
the record of “deeds, mortgages, and all other real property
interests”); ORS 205.130 (county clerk shall have custody of
records of deeds and mortgages of real property and record
of all maps, plats, contracts, etc. “affecting the title to real
property). Although it is true that the parties to the transfer
of a promissory note can always memorialize the transfer in
a separate writing that is recordable, plaintiffs’ reading of
ORS 86.735(1) would turn that practice into a requirement, at

	11
       Defendants contend that it is evident that the word “formal” in ORS
86.110(1) “was intended to have a meaning consistent with the requirements
of ORS 86.060, which describes an ‘assignment of mortgage’ as an instrument
‘executed and acknowledged with the same formality as required in deeds and
mortgages of real property’ ”—and that, as such, it cannot signal a legislative
recognition of “assignment” by indorsement of a note as an alternative to “formal
assignment.” However, because ORS 86.060 was enacted after ORS 86.110,
defendants’ argument about the legislative intention behind the phrase “formal
assignment” is speculative.
Cite as 353 Or 668 (2013)	697

least when nonjudicial foreclosure is contemplated. But ORS
86.735(1) does not appear to express such a requirement,
and certain mortgage statutes that existed at the time ORS
86.735(1) was enacted, one of which bears a remarkable
resemblance to ORS 86.735(1), suggest that the legislature
did not intend one.
	       Those mortgage statutes, ORS 86.060 and former
ORS 86.070 (1959),12 were enacted together in 1895, in
apparent response to pronouncements by this court in
Bamberger, 24 Or at 210-13, about the absence of any
provision in Oregon law for the recording of assignments of
mortgages. The first statute, ORS 86.060, provides:
   	 “Mortgages may be assigned by an instrument in
   writing, executed and acknowledged with the same
   formality as required in deeds and mortgages of real
   property, and recorded in the records of mortgages of the
   county where the land is situated.”
The second statute, former ORS 86.070 (1959), provided:
   	 “Every assignment of mortgage shall be recorded at full
   length, and a reference shall be made to the book and page
   containing such assignment upon the margin of record of
   the mortgage.”	
	        This court discussed the combined effect of those two
statutes, at considerable length, in Barringer. In that case,
Mr. and Mrs. Barringer loaned money to Hayden, evidenced
by a note and secured by a mortgage, the latter of which
was recorded. The Barringers divorced, and Mrs. Barringer
received the note and mortgage as part of their divorce
settlement. Later, Mr. Barringer executed an “assignment”
of the mortgage to Loder, but Barringer refused to sign
an affidavit verifying his claim that he had lost the note
and mortgage. Regardless, Loder recorded the assignment,
convinced Hayden to pay him the full amount due under
the loan, and then recorded a notice canceling the mortgage
(which was actually held by Mrs. Barringer). Mrs. Barringer
later sued Loder to foreclose on the mortgage. Barringer, 47
Or at 224-26. Loder observed that Mr. Barringer’s name
appeared in the record, and he argued, based on the two

	12
      Former ORS 86.070(1959) was repealed in 1965. Or Laws 1965, ch 252, § 1.
698	                              Brandrup v. ReconTrust Co.

statutes quoted above, that he was entitled to rely solely on
the record. In particular, Loder argued that the statutes
required all assignments of mortgages to be made in the
manner provided therein, and that a mortgage “[could]
not be otherwise assigned or transferred than as by these
section prescribed.” 47 Or at 228.
	       This court held, instead, that the first statute’s use of
the permissive word “may,” with reference to an assignment
by an instrument in writing, “recognize[ed] the right *  *    * 
to assign by indorsement of the note.” Id. at 229. The court
then added:
   “When it comes to the manner of recording the assignment,
   the word ‘shall’ is used. Why use the word ‘may’ in one
   section and ‘shall’ in the succeeding one? The relationship
   indicates an intendment that there should be a distinction
   in their application in practice. *  * Assignments in the
                                       * 
   method designated then could be made before the statute
   as well as by assignment of the note, and the act simply
   prescribes that this may still be done by that method, but
   that such assignments shall be recorded in the manner
   pointed out.”
Id. at 229-30 (emphasis added). Thus, even though former
ORS 86.070 required recordation of “every assignment
of mortgage,” and even though Barringer characterized
indorsement of a note as an “assignment,” only those
assignments described in ORS 86.060—that is, assignments
by a written instrument with the formalities of a deed or
mortgage—were required to be recorded.
	        ORS 86.060 and former ORS 86.070—and
Barringer—were the law in Oregon when the OTDA was
enacted in 1959. It is reasonable to infer that the legislature
had that statutory framework in mind when it enacted
wording in ORS 86.735(1) that requires “any assignments of
the trust deed” to be recorded as a prerequisite to nonjudicial
foreclosure. That inference leads to the conclusion that, like
the requirement in former ORS 86.070 (1959) that “every
assignment of mortgage shall be recorded,” the requirement
in ORS 86.735(1) that “any assignments” be recorded refers
only to assignments like those described in ORS 86.060,
which are “in writing, executed and acknowledged with the
Cite as 353 Or 668 (2013)	699

same formality as required in deeds and mortgages of real
property.” Again, the same reasoning logically applies to
assignments of trust deeds, which are “subject to all laws
relating to mortgages.” ORS 86.715.

	        The legislature may have intended to impose a
different recording regime in the nonjudicial foreclosure
context–to require, in that context alone, that a recordable
instrument be executed and recorded to document every
transfer of a trust deed by indorsement of the associated
promissory note, so that a borrower faced with nonjudicial
foreclosure could determine whether the person giving
notice of foreclosure possessed the beneficial interest
in the trust deed at issue and had the right to foreclose.
However, the legislature did not clearly express that intent.
When the legislature enacted the OTDA and required
that “any assignments of the trust deed” be recorded, the
nearly identical statute stating that “[e]very assignment
of mortgage shall be recorded” required recordation only
of formal, written assignments. Barringer, 47 Or at 230;
former ORS 86.070 (1959). There is nothing to indicate
that, when it enacted ORS 86.735(1), the legislature did not
similarly intend for “assignments” of a trust deed to refer
only to formal, written assignments of the trust deed, not
transfers by indorsement of the underlying debt instrument.
By describing an “assignment of mortgage” as a written
instrument executed “with the same formality as required in
deeds,” ORS 86.060, and then, in the immediately following
section, requiring recordation of “[e]very assignment * * * at
full length,” former ORS 86.070 (1950), it is apparent that
the only “assignment” the 1959 legislature had in mind in
enacting ORS 86.735(1) was an assignment by a written
instrument. It follows that, for purposes of ORS 86.735(1),
“assignments of the trust deed” means written assignments
that are executed and acknowledged with such formalities,
not a post hoc memorialization of a transfer of the secured
obligation created solely for the purpose of recording. Thus,
the answer to the third certified question is “no.” ORS
86.735(1) does not require recordation of “assignments”
of the trust deed by operation of law that result from the
transfer of the secured obligation.
700	                             Brandrup v. ReconTrust Co.

	        In giving that answer, we acknowledge a practical
concern that appears to loom in the background of these
cases—that construing the phrase “any assignments” in ORS
86.735(1) as applying only to formal, written assignments of
a trust deed renders the provision meaningless. In particular
(the concern posits), a recording requirement that is so easily
bypassed can have no conceivable function in the OTDA’s
statutory scheme; indeed, read in that way, the requirement
precludes homeowners in foreclosure from ascertaining the
identity of the true beneficiary. That concern, however, rests
on the mistaken assumption that the right of a defaulting
homeowner to establish the identity of the true beneficiary
depends exclusively on plaintiffs’ preferred reading of the
recording requirement in ORS 86.735(1).
	        To the contrary, the OTDA is laced with provisions
that indicate that the grantor is entitled to know the identity
of the beneficiary. As discussed above, ORS 86.753(1), for
example, provides that the grantor (and others) may cure
a default before a foreclosure sale by making payment, and
paying costs and expenses “to the beneficiary.” Under ORS
86.737(2)(b)(B), notice to the grantor of a foreclosure sale
must include “a telephone number that will allow the grantor
access during regular business hours to person-to-person
consultation with an individual authorized by the beneficiary
to discuss the grantor’s payment and loan term negotiation
and modification.” Similarly, under ORS 86.745(1), a notice
of sale must include the name of the “beneficiary.” Finally,
ORS 86.759(5) provides that statutory requirements that
the trustee provide default and cure-related information to
the grantor and others “do not affect the duty of beneficiaries
to provide information to grantors.” In sum, those provisions
all assume that the true beneficiary must be identifiable.
Thus, no part of our answer to the third certified question
should be taken to suggest that, where the foreclosing party
is not the original lender, the foreclosing party need not
provide definitive documentation of its status as the lender’s
successor in interest to establish its right to foreclose.
	        For that same reason, the fourth certified question,
relating to MERS’s authority to act as an agent for a lender
or a lender’s successor in interest, is important. Although
we have concluded that the lender or its successors need not
Cite as 353 Or 668 (2013)	701

record assignments of the trust deeds that occur by operation
of law, the fact remains that, when those persons fail to do
so, they are vulnerable to challenges that may force them
to judicially establish their interests and authority to act.13
With that foundation in place, we turn to the fourth certified
question.
              V.  FOURTH CERTIFIED QUESTION
    	 “Does the Oregon Trust Deed Act allow MERS to
    retain and transfer legal title to a trust deed as nominee
    for the lender, after the note secured by the trust deed
    is transferred from the lender to a successor or series of
    successors?”
	           Plaintiffs assert:
    	 “The OTDA does not allow MERS to retain or transfer
    legal title to a trust deed after the promissory note is
    transferred from the original lender to a successor. This is
    because MERS has no legal title to the interests conveyed
    under a trust deed and because once its principal has no
    legal interests under a trust deed, it may not act on behalf
    of that principal to do for itself what its principal could not
    do. Even if it had some claim of legal title to the trust deed
    document, that would make MERS nothing more than a
    document custodian, not a beneficiary with rights to assign.
    	 “In addition, even if the trust deeds could somehow be
    construed to convey legal title to MERS, such a conveyance
    would be expressly forbidden under the OTDA. As the only
    interest granted by the Borrower in the security instrument
    is a lien on the land as security for the repayment on the
    obligation and that legal title is conveyed to the trustee
    who holds it in trust for the beneficiary, there is simply no
    interest for MERS to hold.”
Plaintiffs also assert that MERS’s powers as an agent are
derived from and limited to those of its principal. Thus,
plaintiffs argue, MERS has no power or authority to act as
	13
       Depending on whether MERS is an agent of the initial lender and its
successors in interest, one commentator has suggested that MERS can establish a
satisfactory chain of title “by recording a memorandum of the series of assignments
from itself as an agent of the original lender to itself as an agent of each successive
noteholder.” Dunne, 49 Willamette L Rev at 100-01. As explained in our answer
to the fourth certified question below, these cases do not furnish an opportunity
to decide whether such a course of action would effectively establish the ultimate
beneficiary’s identity and right to proceed with nonjudicial foreclosure.
702	                              Brandrup v. ReconTrust Co.

an agent of a principal that has divested itself of its interest
in a trust deed.
	        Defendants reply, first, that “legal and equitable
rights to property can be separated and held by different
parties.” It follows, they assert, that the OTDA allows MERS
to hold legal title to a trust deed as nominee for the lender,
after the note secured by the trust deed is transferred
from the lender to a successor or series of successors.
Alternatively, defendants argue that MERS has authority
as an agent of the original lender and its successors to
execute any assignments required or convenient to facilitate
the nonjudicial foreclosure process.
	        Because of the way in which the parties have
presented their arguments with respect to the fourth
certified question, it is useful to reframe it in two parts. The
first part of the question is:
   	 “Does the Oregon Trust Deed Act allow MERS to
   hold and transfer legal title to a trust deed as nominee
   for the lender, after the note secured by the trust deed
   is transferred from the lender to a successor or series of
   successors?”

The second part of the question is:
   	 “If the answer to the first part of the question is ‘no,’
   does MERS nevertheless have authority as an agent for
   the original lender and its successors in interest to act on
   their behalves with respect to the nonjudicial foreclosure
   process?”

	        For the reasons now explained, the answer to the
first part of the question is “no.” As discussed, a beneficiary’s
interest under a trust deed is analogous to a mortgagee’s
interest under a mortgage. ORS 86.715. Further, a mortgage
conveys no legal or equitable interest in fee or for life to
the mortgagee, but merely creates a lien that constitutes
security for the underlying obligation and grants the
mortgagee, upon the mortgagor’s default, the right to have
the property sold to satisfy the obligation. See ORS 86.010;
Stout v. Van Zante, 109 Or 430, 435-36, 219 P 804, 220 P 414
(1923); Schleef, 107 Or at 74-79; Ukase Inv. Co. v. Smith, 92
Cite as 353 Or 668 (2013)	703

Or 337, 340, 181 P 7 (1919). Although no Oregon case has
considered which parties hold legal and equitable interests
in the lien embodied in a trust deed in the context of the
OTDA, a trustee typically holds legal title to the subject of
the trust and the beneficiary holds equitable title.
   “When a trust is created, the legal title is vested in the
   trustee *  *. ‘A trust implies two estates,—one legal, and
             * 
   the other equitable; it also implies that the legal title is held
   by one person, the trustee, while another person, the cestui
   que trust [the beneficiary], has the beneficial interest.’ ”

Morse et al. v. Paulson et al., 182 Or 111, 117, 186 P2d 394
(1947) (quoting Allen v. Hendrick, 104 Or 202, 223, 206
P 733 (1922)) (emphasis added). ORS 86.705(7) provides that
a trust deed is “a deed * * * that conveys an interest in real
property to a trustee in trust to secure the performance
of an obligation the grantor or other person named in the
deed owes to a beneficiary.” Under the OTDA, therefore, it
is logical to conclude that the trustee holds legal title to the
lien conveyed by the trust deed and the beneficiary holds
equitable title to that lien. It follows that, because MERS is
neither the trustee nor the beneficiary, it holds no interest at
all in the lien conveyed by the trust deed.

	        Relying on this court’s decision in Klamath Irrigation
District v. United States, 348 Or 15, 227 P3d 1145 (2010),
defendants remonstrate that “legal and equitable rights to
property can be separated and held by different parties.” In
Klamath Irrigation District, several irrigation districts and
agricultural landowners brought consolidated suits against
the United States, claiming that temporary reductions of
irrigation water by a federal agency had breached contracts
for the supply of irrigation water from the Klamath River
Basin reclamation project, had breached an interstate
compact, and had violated the Fifth Amendment by the
uncompensated taking of property. In answering certified
questions from a federal appeals court, we held that Oregon
law recognized distinct legal and equitable interests in
the right to use water from the Klamath River Basin that
belonged to the irrigation districts and the landowners for
704	                             Brandrup v. ReconTrust Co.

whose benefit the irrigation districts held water rights. Id.
at 43-44.
	        Defendants’ reliance on Klamath is unavailing
for two reasons. First, in Klamath, this court reiterated
the principle that, in determining whether an equitable
property right exists, “a court of equity will look beyond the
form of the proceeding and if possible consider the substance
of the right.” Id. at 44. As discussed above, any analysis of
the substance of the transaction or the actual roles of the
parties articulated in the trust deed compels the conclusion
that MERS owns neither legal nor equitable title to the lien
of the trust deed. Second, although defendants assert that
“Oregon law explicitly recognizes that each of the foregoing
property interests is capable of further division between
holders of legal and equitable title,” neither Klamath nor
any other authority that defendants have identified so holds.
Certainly, an equitable interest may be fractionally divided
among a number of owners (as this court recognized to be
the case among the members of a water district in Klamath),
but that is not the circumstance with MERS.
	         Rather, defendants’ point seems to be that, even
though MERS does not have the right to receive repayment
of the notes in these cases, it can nevertheless hold legal
title to the trust deeds, including the legal right to foreclose
them. That proposition is not correct for two reasons. First,
as discussed in detail in our answer to the first and second
certified questions, the beneficiary of a trust deed under the
OTDA is the lender or the lender’s successor in interest as
respects the right to repayment. And it is the same beneficiary
that has the other statutory rights and obligations that the
OTDA confers and imposes, including the power to control
the foreclosure decision and process through the right to
appoint a successor trustee. Second, as explained in our
answer to the first certified question, the policy choice that
the OTDA reflects (that the “beneficiary” must be the person
entitled to repayment of the secured obligation) is rooted
in the common-law principle that a foreclosing party must
have the power to enforce the underlying note. See Holton,
99 Or at 429. Accordingly, we conclude that the OTDA does
not allow MERS to hold or transfer legal title to a trust
Cite as 353 Or 668 (2013)	705

deed separately from the right to receive repayment of the
obligation that it secures. Because MERS does not have the
right to receive repayment of the notes in these cases, the
OTDA does not allow MERS to hold and transfer legal title
to the trust deeds that secure them.
	        That conclusion brings us to defendants’ and
MERS’s alternative argument that MERS has authority
as an agent of the original beneficiary and any successor
beneficiaries of the subject trust deeds to take any steps
that are required or convenient to carry out the nonjudicial
foreclosure process. The accuracy of that assertion depends
on whether MERS qualifies as an agent of those entities for
purposes of Oregon law. See Restatement (Third) of Agency
§ 1.02 (2006) (“Whether a relationship is characterized as
agency in an agreement between parties or in the context
of industry or popular usage is not controlling.”). This court
has defined agency in the following terms: “[T]o be an
‘agent’—using the well-defined legal meaning of that term—
two requirements must be met: (1) the individual must be
subject to another’s control; and (2) the individual must ‘act
on behalf of’ the other person.” Vaughn v. First Transit, Inc.,
346 Or 128, 136, 206 P3d 181 (2009).
	         Plaintiffs assert that, even if MERS is an agent of
the beneficiaries in these cases, MERS’s interests in the
trust deeds cannot extend beyond those of the beneficiaries
for whom it purports to act, because its powers as an agent
cannot exceed those held by its principals. Thus, when
the interest of its principal is conveyed, plaintiffs argue,
MERS’s authority to act for that principal is simultaneously
terminated. According to plaintiffs, nothing in Oregon law
“supports the idea of freestanding agency on which MERS
relies.” Moreover, plaintiffs note that at least two other courts
recently have agreed with their arguments. For example, the
Arkansas Supreme Court has held, under virtually identical
statutory language:
   “MERS was at best the agent of the lender. The only
   recorded document provides notice that [Lender] is the
   lender and, therefore, MERS’s principal. MERS asserts
   [Lender] is not its principal. Yet no other lender recorded
706	                                       Brandrup v. ReconTrust Co.

    its interest as an assignee of [Lender]. Permitting an agent
    such as MERS purports to be to step in and act without a
    recorded lender directing its action would wreak havoc on
    notice in this state.”
Mortgage Electronic Registration System, Inc., v. Southwest
Homes of Arkansas, 2009 Ark 152, 301 SW3d 1, 8 (2009).14
The Supreme Court of Washington recently reached a
similar conclusion:
    	 “MERS attempts to sidestep this portion of traditional
    agency law by pointing to the language in the deeds of
    trust that describe MERS ‘as acting solely as a nominee
    for Lender and Lender’s successors and assigns.’ *  * But
                                                       * 
    MERS offers no authority for the implicit proposition that
    the lender’s nomination of MERS as a nominee rises to an
    agency relationship with successive noteholders.”

Bain v. Metropolitan Mortg. Group, Inc., 175 Wash 2d 83,
107, 285 P3d 34, 45-46 (2012).
	        Here, plaintiffs allege that their original lenders
sold and terminated their respective interests in the trust
deeds and underlying promissory notes shortly after the
origination of plaintiffs’ loans. More to the point, they
allege that those original lenders transferred their interests
in their promissory notes and trust deeds (followed by
multiple subsequent transfers as well) long before MERS
executed or recorded an assignment of the trust deeds to
the purported ultimate successors in interest of the original
lenders. In each of the cases, the plaintiffs assert “that the
promissory note was sold and the trust deed was assigned
from the originating lender of each respective loan through
a series of subsequent intervening purchasers until it was
purportedly conveyed to the current party on whose behalf
each of the nonjudicial foreclosures was being conducted.” In
particular, plaintiffs assert that “their loans were sold first
to a separate entity known as a Sponsor, which subsequently
sold the promissory note and assigned the trust deed to an
entity known as a Depositor, which subsequently sold the

	14
       Under the Arkansas statute, “beneficiary” means “the person named or
otherwise designated in a deed of trust as the person for whose benefit a deed of
trust is given or his successor in interest” Ark. Code Ann. § 18-50-101(1) (2010).
Cite as 353 Or 668 (2013)	707

promissory note and assigned the trust deed to Defendant,
Bank of New York Mellon FKA The Bank of New York,
(“BNYM”) as Trustee for the respective securitized trusts of
which BNYM acts as Trustee.”
	         As an initial matter, it is worth noting that, in each
case, it is MERS itself, not MERS as “nominee” for the actual
beneficiary, that executed a written assignment of the trust
deed to the reputed ultimate successor of the original lender
and recorded that assignment in the pertinent real property
records. Because MERS does not qualify as the beneficiary,
an assignment in such capacity is invalid. See ORS 86.705(2);
ORS 86.735(1). But, assuming, as it asserts, that MERS also
acts as an agent or nominee for the original beneficiary and
successor beneficiaries, a different set of rules applies.15
	        In Oregon, agency is “[t]he relationship which
results from the manifestation of consent by one person to
another that the other shall act on behalf and subject to his
control, and consent by the other so to act.” Hampton Tree
Farms, Inc. v. Jewett, 320 Or 599, 617, 892 P2d 683, 694
(1995) (quoting Ruddy v. Ore. Auto. Credit Corp., 179 Or 688,
702, 174 P2d 603, 609 (1946)) (internal quotations omitted).
The principal-agent relationship is defined by, among other
things, the ongoing ability of the principal to maintain
control over the agent by giving the agent instructions.
See Vaughn, 346 Or at 136 (quoting Restatement (Third) of
Agency § 1.01 comment f (2006)). 	
	        Defendants assert that, even where multiple trust
deed transfers have occurred, MERS has ongoing authority
to act for its past and present principals under the MERS
system. MERS explains that,

	15
        In their arguments to this court, defendants at times refer to MERS as
lender’s “agent,” and at other times as lender’s “nominee” (the status MERS is
accorded in the trust deeds). Although the distinction is far from clear, there is
some basis for concluding that the authority of a nominee vis-à-vis its principal
can be more limited than that of an ordinary agent. In that regard, we observe
that Black’s Law Dictionary defines a “nominee,” as “2. A person designated to act
in place of another, usu. in a very limited way[;] 3. A party who holds bare legal
title for the benefit of others or who receives and distributes funds for the benefit of
others.” Black’s Law Dictionary 1076 (8th ed 2004). It may be, however, that MERS
and its members understood the word as a synonym for “agent.” The record before
us does not illuminate that issue.
708	                                        Brandrup v. ReconTrust Co.

    “[w]hen MERS executes an assignment of the trust deed,
    it is doing so as nominee agent of the then-note owner.
    Plaintiffs and amicus OTLA wrongly view MERS as acting
    on behalf of the former principal, the original lender.
    Agency principles permit MERS to serve as a common
    agent of the original lender and all successors and assigns,
    and all parties to the trust deed—including the borrower—
    acknowledge that MERS will do this. Accordingly, when
    MERS executes a written assignment of ‘all beneficial
    interest under that certain Deed of Trust[,]’ it is acting
    on behalf of the current owner of equitable title to the
    beneficial interests under the trust.”
Similarly, amicus Oregon Land Title Association asserts:
    “Finally, as to the answer on the fourth certified question,
    MERS has authority to retain and transfer legal title to a
    trust deed after a transfer of the underlying promissory
    note as long as the lender’s successors and assigns also are
    members of MERS. In such circumstances, the lender’s
    successors and assigns have given MERS the requisite
    authority to act on their behalf. Thus, as long as MERS
    remains constant as a nominee holding legal title to the
    trust deed for the lender and any successors or assigns,
    MERS has authority to transfer legal title to the trust
    deed.”
	        According to defendants and MERS, courts
examining the issue recognize that MERS’s role as nominee
or agent carries forward to subsequent obligees—indeed,
defendants assert, that was one of the very purposes for the
creation of MERS.16 Those propositions notwithstanding,
the difficulty is that, on the record before us, it is unclear
whether such a broad common agency relationship exists in
these cases among MERS and the original lenders and their
	16
         See In re Tucker, 441 BR 638, 646 (Bankr. WD Mo 2010) (“MERS was
the agent for New Century under the Deed of Trust from the inception, and
MERS became agent for each subsequent note-holder under the Deed of Trust
* * *.”); Kiah v. Aurora Loan Services, LLC, 2011 WL 841282 at 4 (D Mass 2011)
(“dissolution of [lender] would not and could not prevent [note holder] from
obtaining an assignment of the mortgage from MERS, both as a matter of law
and according to the arrangement that existed between MERS and Aurora as a
‘successor and assign’ ”); MERSCORP, Inc. v. Romaine, 861 NE2d 81, 83 (NY 2006)
(“Members contractually agree to appoint MERS to act as their common agent on
all mortgages they register in the MERS system.”); see also Restatement (Third)
of Agency § 1.04 (an agent may act on behalf of both a disclosed principal, i.e., the
original lender, and a later unidentified principal, i.e. original lender’s successor
and assign).
Cite as 353 Or 668 (2013)	709

successors in interest. The trust deeds, by themselves, do not
establish the necessary relationship; they instead confuse
the issue by first granting MERS the seemingly-narrow
status of a “nominee” and then purporting to grant MERS
authority to “exercise” other “interests” if “necessary.” More
importantly, although the trust deeds are signed by the
borrowers, the original lenders and their successors, who
are the other parties under defendants’ theory of “common
agency,” are not signatories. Accordingly, the answer to
the second part of the fourth question depends, in large
measure, on evidence with respect to who ultimately holds
the relevant interests in the notes and trust deeds, and
whether that person and each of its predecessors in interest
conferred authority on MERS to act on their behalves in the
necessary respects. And that evidence is not present in the
record before us.
	       The answers to the two parts of the fourth certified
question thus may be stated in the following terms:
   (4)(a)  “Does the Oregon Trust Deed Act allow MERS to
   hold and transfer legal title to a trust deed as nominee
   for the lender, after the note secured by the trust deed
   is transferred from the lender to a successor or series of
   successors?”

   Answer:  “No.” For purposes of the OTDA, the only
   pertinent interests in the trust deed are the beneficial
   interest of the beneficiary and the legal interest of the
   trustee. MERS holds neither of those interests in these
   cases, and therefore, it cannot hold or transfer legal title to
   the trust deed. For purposes of our answer to the first part
   of the fourth certified question, it is immaterial whether
   the note secured by the trust deed has previously been
   “transferred from the lender to a successor or series of
   successors.”

   (4)(b)  “Does MERS nevertheless have authority as an
   agent for the original lender and its successors in interest
   to act on their behalves with respect to the nonjudicial
   foreclosure process?”

   Answer:  The power to transfer the beneficial interest in a
   trust deed or to foreclose it follows the beneficial interest in
710	                                        Brandrup v. ReconTrust Co.

    the trust deed. The beneficiary or its successor in interest
    holds those rights. MERS’s authority, if any, to perform any
    act in the foreclosure process therefore must derive from
    the original beneficiary and its successors in interest. We
    are unable to determine the existence, scope, or extent of
    any such authority on the record before us.
	          Certified questions answered.
	          KISTLER, J., concurring in part and dissenting in
part.
	        The United States District Court for the District of
Oregon has certified four state law questions to this court.
In answering the first two questions, the majority concludes
that only the lender and its successors can be designated as
the beneficiary on a trust deed. In answering the last two
questions, the majority concludes that not every assignment
of the lender’s interest in the trust deed must be recorded
and that Mortgage Electronic Recording Systems, Inc.
(MERS) can serve as the agent for both the lender and its
successors if the record shows that those entities agreed to
that arrangement. I agree with the majority’s answers to the
last two questions but would answer the first two questions
differently. In my view, nothing in state law precludes the
parties to a trust deed from designating MERS as the
beneficiary as long as MERS is serving as the agent for the
lender and its successors.1
	        Bart and Jessica Brandrup executed a trust deed on
their property to secure a debt evidenced by a note that they
gave their lender, America’s Wholesale Lender. In their trust
deed, the Brandrups designated MERS “acting solely as a
nominee for Lender and Lender’s successors and assigns” as
the “beneficiary under this Security Instrument.” The issue
that the first two certified questions pose is whether state law
required the Brandrups to designate America’s Wholesale
Lender as the beneficiary rather than MERS acting as the
nominee or agent for the lender and its successors.2

	1
       In referring to the lender’s successors, I am referring to those successors in
interest that are entitled to enforce the obligation that the trust deed secures.
	2
       As the majority notes, a nominee is a limited agent. See 353 Or at 707 n 15.
Cite as 353 Or 668 (2013)	711

	          The majority finds a complete answer to that issue
in the definition of “beneficiary” in the Oregon Trust Deed
Act. See ORS 86.705(2). That Act authorizes a borrower to
grant a trust deed on real property to secure an underlying
obligation3 and, in a definitional section, provides that
“ ‘[b]eneficiary’ means a person named or otherwise
designated in a trust deed as the person for whose benefit
a trust deed is given, or the person’s successor in interest
* * *.” Id. As the majority observes, a trust deed secures an
obligation, frequently evidenced by a promissory note, and
the lender and its successors are the persons for whose
benefit the trust deed is given; that is, the trust deed is
given to secure the obligation that the grantor of the trust
deed owes the lender. That much is unexceptional.
	         It is one thing, however, to say that the statutory
definition identifies the lender and its successors as the
persons who ordinarily will be the beneficiaries of the trust
deed. It is quite another to find in that definition a legislative
intent to preclude the parties to a trust deed from designating
the agent of the lender and its successors as the beneficiary.
We should be hesitant to find in that run-of-the-mill
definition a limitation on the parties’ customary authority to
structure their transactions as they see fit, unless the text,
context, or history of that definition requires it. In my view,
the statutory definition of beneficiary serves a more modest
role than the one the majority assigns it. Certainly, nothing
in the text of the definition expressly forecloses the parties
from designating the lender’s agent as the beneficiary in the
trust deed. Nor does the legislative history lend any support
for the majority’s conclusion. Rather, the legislative history
shows only that, in authorizing the use of trust deeds, the
legislature sought to provide a more cost-effective means of
foreclosing liens on real property and, in doing so, to expand
the pool of capital available for small homeowners. See
Minutes, House Committee on Judiciary, SB 117, Apr 16,
1959, at 1. It is difficult to derive from that history any

	3
       Essentially, a trust deed is a mortgage with the power of sale. A trust deed
differs from a mortgage primarily in that it conveys an interest in real property to
a trustee to secure an obligation owed the beneficiary, see ORS 86.705(7), and, in
the event of the grantor’s default, authorizes the trustee to conduct a nonjudicial
foreclosure sale on behalf of the beneficiary, see ORS 86.710.
712	                                      Brandrup v. ReconTrust Co.

legislative intent to limit the parties’ ability to designate the
lender’s agent as the beneficiary.
	        To be sure, the context provides a limitation on the
persons whom the parties may designate as the beneficiary.
As noted, a trust deed, like a mortgage, serves as security for
the underlying obligation—in this case, a promissory note.
Ordinarily, the mortgage follows the note. See Restatement
(Third) of Property: Mortgages § 5.4(a) (1997) (“A transfer
of an obligation secured by a mortgage also transfers
the mortgage unless the parties to the transfer agree
otherwise.”). Moreover, “[a] mortgage may be enforced only
by, or in behalf of, a person who is entitled to enforce the
obligation the mortgage secures.” Id. § 5.4(c). Put differently,
“in general a mortgage is unenforceable if it is held by one
who has no right to enforce the secured obligation.” Id. § 5.4
comment e. One exception to that general rule occurs when
the person who holds the mortgage does so as the “trustee
or agent” of the person who has the right to enforce the
obligation secured by the mortgage. Id. In that circumstance,
the trustee or agent may enforce the mortgage on behalf of
the lender and its successors.
	        On the one hand, that context suggests that the
authority to name or otherwise designate the beneficiary
does not extend to naming a person whose designation
would render the trust deed unenforceable and thus defeat
its purpose. See id. (noting that “in general a mortgage is
unenforceable if it is held by one who has no right to enforce
the secured obligation”). On the other hand, that context
suggests that the class of persons statutorily authorized to
be “named or otherwise designated in [the] trust deed” as the
beneficiary is not limited to the lender and its successors, as
the majority concludes. Rather, it extends to persons (agents
and trustees) who also may enforce the mortgage on behalf
of the lender and its successors. Accordingly, I would hold
that the statutory definition of beneficiary is broad enough
to permit the parties to a trust deed to designate MERS as
the beneficiary as long as MERS is the nominee or agent of
the lender and its successors in interest.4

	4
       The terms of the trust deed could be much clearer about the role that MERS
plays. However, defendant argues that, under the terms of the trust deed, MERS
Cite as 353 Or 668 (2013)	713

	        Ultimately, the difference between my answer
and the majority’s answer may be more semantic than
substantive. After all, in answering the fourth question, the
majority recognizes that, in theory, MERS can serve as the
agent for the lender and its successors. The problem, as the
majority correctly observes, with applying that theory in this
case is that the record does not disclose whether the lender’s
successors in interest also have authorized MERS to act as
their agent. As I understand the majority’s answers, they
effectively lead to the same conclusion that I would reach.
However, because I would answer the first two certified
questions differently from the majority, I dissent in part and
concur in part in its answers.
	       Balmer, C. J., joins in this opinion concurring in
part and dissenting in part.

serves as the agent for the lender and its successors, and the terms of the trust
deed permit that understanding.