Ultra Viresis
a Latin phrase meaning literally “beyond the powers”, although its standard legal translation and substitute is “beyond power”. If an act requires legal authority and it is done with such authority, it is characterised in law as intra vires (literally “within the powers”; standard legal translation and substitute, “within power”). If it is done without such authority, it is ultra vires. Acts that are intra vires may equivalently be termed “valid” and those that are ultra vires “invalid”.
Just because you have an assignment or a deed or any other document purportedly executed on behalf of a corporation, does not mean that it is valid. If the person executing does not have the authority or if the act itself is not authorized by the corporation, the act is not valid. Here’s a clear example. Two clients come in my office, the President of a corporation “sells” a property to my client and the client writes a check for $500,000. Problem is I didn’t examine the corporate records and I didn’t see the corporate books so I didn’t catch that the President was not authorized by the Board of Directors to sell the property….the deed is invalid and I’m in big trouble. Many across the country have been making the argument that the MERS signing officers system is similarly flawed because the corporate procedures are not followed. Such is the case in a case filed in Texas. The text of the Order released by a federal judge spells all this out…
Defendants argue that Plaintiff alleges that MERS’ corporate secretary appointed Blackstun as a MERS assistant secretary, and the appointment was not valid because Blackstun’s appointment was not also approved by MERS’ board of directors, as allegedly required by MERS’ by-laws. Defendants argue that this is negligence at best, and not fraud. Defendants also assert that the party that would be the defrauded party would be MERS, not Plaintiff, and that Plaintiff’s interest in the Property is wholly unaffected by the assignment.
Plaintiff argues that the Assignment filed in the property records is a fraudulent lien claim. Plaintiff alleges that the assignment is void because it was executed by a person neither employed nor authorized by MERS to execute a conveyance. Plaintiff alleges that MERS intended that the document be given the same effect as a lawfully executed instrument, and the execution and filing of the documents were done for the purpose of harming Plaintiff. Plaintiff alleges that there was a scheme on the part of a MERS officer to bypass the Board of Directors and cloak others with authority only allowed by the Board of Directors. Plaintiff argues that this is not an inadvertent failure to comply with a duty, but rather an intentional act, done knowingly with the specific intent that the consequences of his action be brought to fruition.
In this case it is alleged that MERS did not properly appoint Blackstun as an officer of MERS and that Blackstun did not have authority to bind MERS, and when Blackstun executed the assignment, it caused MERS to file a fraudulent document in the deed records. The Court finds that Plaintiff has stated a plausible claim, in part, because Defendants fail to address the issue of the legal effect of Blackstun not being authorized to execute the assignment. If he had no such authority, MERS would know that fact. It appears to be more than mere negligence by MERS. Discovery should be allowed, and after discovery is completed, the issue of whether there is a valid claim under ß12.002 can be determined by a motion for summary judgment.
Read all the pleadings for much more on this most interesting discussion, also read the deposition of MERS officer Hultman below.
But there was another post I did yesterday which really had me thinking. It’s the Reveredo case which is cited in a recently published article in the esteemed Cardozo Law Review Journal. What is most astonishing about all of this dustup is (as expressed by Judge Walt Logan in Azize) the fact that MERS just came out of nowhere, no legislation, no court order and spread all across this country. Another key opinion acknowledges this point but the court just shrugs its collective shoulders and says, “hey we know all this MERS stuff ain’t exactly legal, but what the heck, what can possibly go wrong?”…..
” To the extent that courts have encountered difficulties with the question, and have even ruled to the contrary of our conclusion,” the court opined, ” the problem arises from the difficulty of attempting to shoehorn a modern innovative instrument of commerce into nomenclature and legal categories which stem essentially from the medieval English land law.” (suggesting that a formalistic application of foreclosure law might lead to the conclusion that MERS lacks standing to foreclose in some circumstances, but ” no substantive rights, obligations or defenses are affected by the use of the MERS device, [so] there is no reason why mere form should overcome the salutary substance of permitting the use of this commercially effective means of business”).
