Legal Question in Civil Litigation in California

1. The transfer of a note transfers the security, i.e. the deed of trust, as a matter of law. No assignment of the deed of trust is necessary. It is settled by abundant authority in California that a transfer of a debt secured by a mortgage or a deed of trust, whether by way of assignment or, if embodied in a negotiable instrument, by negotiation as defined in UCC sects. 1-201(20) and 3-202 is technically a transfer of the secured obligation and that, unless otherwise agreed, "the security follows the debt.' "The assignment of a debt secured by mortgage carries with it the security." (Civ. Code, sect. 2936.) "Consonant with the foregoing, we note the following established principles: that a deed of trust is a mere incident of the debt it secures and that an assignment of the debt 'carries with it the security.'" (Domarad v. Fisher & Burke, Inc. (1st Dist. 1969) 220 Cal.App.2d 543, 553.)

"The transfer of a thing transfers also all its incidents, unless expressly excepted; but the transfer of an incident to a thing does not tranfer the thing itself." (Civ. Code, sect. 1084.) "Furthermore, the indorsement of the note by Mrs. McElroy, named as payee, transferred the deed of trust without other assignment. A lien is but an incident of the debt secured, and cannot be transferred apart therefrom. A transfer of the debt carries with it the lien." (Lewis v. Booth (1935) 3 Cal.2d 345.)

I don't know what you mean by your statement that "the Deed could not enforce the Note."

2. I don't know what you mean by the Note and Deed being separated. As pointed out in #1, transfer of the note automatically transfer the deed of trust, without the necessity of any other assignment of the deed of trust.

Civil Code section 2924, subdivision (a)(1) states that a "trustee, mortgagee, or beneficiary, or any of their authorized agents" may initiate the foreclosure process. However, nowhere does the statute provide for a judicial action to determine whether the person initiating the foreclosure process is indeed authorized, and there is no ground for implying such an action.

MERS is an authorized agent for the lender, and I would not be surprise if you appointed MERS in your loan/ deed of trust. MERS clearly has the right to initiate foreclosure.

3) As an agent of the lender/ beneficiary MERS had the right to execute a substitution of trustee. (Civ. Code, sect. 2934a.) There is no requirement that the trustee under a deed of trust be separate from the beneficiary, so there is no conflict of interest.

4) MERS is the agent of the beneficiary/ lender and can execute documents.

5) I have no idea what you are referring to in 5.

6) You continue to operate on the erroneous premise that the note and deed of trust are separated, and they are not.

Any attorney who is competent would point this out to you. The lender's attorneys will most certainly point it out to you when they demur to a complaint you file, and seek sanctions. I have half a mind to send you a bill for wasting my time.

I agree with Mr. Roach on the point that the deed of trust does not have to be assigned as long as the note was properly assigned. From there I'm not so sure. I have over twenty years of real estate and title industry experience, including six years as a vice president and litigation counsel for Fidelity National Title, and quite frankly the whole MERS thing has a lot of us in real estate and title law scratching our heads at what they thought they could get away with. So it's quite possible, but far from certain, that you have a case here. My main office is in Walnut Creek. If you'd like to make an appointment for a no-obligation initial consultation, let me know.