MERS, Niday, and Occam’s Razor

Posted on by Phil Querin

As I was reading Kelly Harpster’s excellent article on The Housekeeping Report, summarizing the January 9, 2013 oral arguments on the Niday case[1] before the Oregon Supreme Court, I felt I was ringside with Howard Cosell covering an old Ali-Frazier title bout:

“Frazier hits Ali with a short left jab, followed by a quick right – Ali feints, dances, bobs, weaves – he laughs, drops his hands and mugs at Frazier, taunting him, then fires back with a flurry of punches to Frazier’s midsection.  Oh, there’s the bell!  That was the round 15[2]!  The ref jumps in to separate the two gladiators, who are exchanging angry words and gestures.  Their corner-men separate the pugilists, each side claiming victory.  Ladies and gentlemen, this is why they call it the “Sweet Science.”  Have you ever seen such a magnificent exhibition of the sport?  It truly was a “Thrilla in Manila!”  Now let’s go to the judges’ scorecards….”

By the end of the 15th round oral argument, I was [intellectually] exhausted.  Kelly did a fabulous job in giving us a blow-by-blow description of the legal arguments, peppered with her own ringside comments.  Now, I guess like everyone else, we’ll just have to wait for the scores to be tabulated and the decision announced.  I hope when that occurs, the Court invites Michael [“Let’s get ready to rumble!”] Buffer to do the honors.

I have no intention of analyzing either side’s argument on this post.  As I’ve said before, I have a chronic case of “MERS Fatigue.”  Rather, I want to discuss the MERS-Niday disputation from a more metaphysical perspective.  Let’s start with Occam’s Razor:[3]

“Pluralitas non est ponenda sine neccesitate
Frustra fit per plura quod potest fieri per pauciora”

This is a principle “…attributed to the 14th century logician and Franciscan friar William of Ockham.  Ockham was the village in the English county of Surrey where he was born.” [For a complete discussion, go to this link. – PCQ]  The principle of Occam’s Razor appears to have several applications and interpretations.  For me, a layman, the most useful paraphrase of the theorem is the following:

When you have two competing theories about a particular event, the simpler one is the better.”  A bastardized version of the principle behind Occam’s Razor is the universal: “Keep it Simple, Stupid!” or “KISS!”

If William of Ockham were alive today, sitting as a Justice on the Oregon Supreme Court, I can’t help but think he would have asked some of the following questions during the MERS-Niday oral argument:

  • “Tell me this counsel: Why are we having this discussion today about MERS being a “beneficiary” under Oregon’s Trust Deed law?  The Oregon Trust Deed Act or “OTDA” was enacted in 1959.  MERS did not exist until the late 1990s. The term “beneficiary” was left untouched for the 40 years preceding MERS, and has continued untouched to this day. It was used then, and is used now, to statutorily define the beneficiary as the entity benefited under the trust deed. How can you argue with a straight face that the 1959 Oregon Legislature intended the term “beneficiary” to apply to something that never existed until 40 years later?” 
  • “None of the trust deed terminology has radically changed in the OTDA for half a century.  The only thing that has changed is that MERS was created by the lending and title industries.  The only effort MERS made to deal with legal compliance in the 50 states was to insert the “custom and usage” provision in its trust deeds.  Isn’t this language a rather transparent effort to say that if the law of the jurisdiction doesn’t permit MERS to be the beneficiary, then the “custom and usage” provision can be used to magically make it so.  With this provision, you could turn MERS into a breadbox if you wanted.  Isn’t this discussion merely an exercise in circular reasoning and question begging?”
  • “Counsel, I must say, I find your argument that MERS is a beneficiary fascinating – in much the same way I can appreciate a Rube Goldberg machine.  But isn’t your argument that MERS is a “beneficiary” under Oregon law about as useful as discussing how many angels can dance on the head of a pin?  To  set this up as a logical syllogism:

If the major premise is: “A beneficiary is one benefited by the trust deed;”

And the minor premise is: “The lender is benefited by the trust deed;”

Isn’t the conclusion inescapable? “Ergo, the lender is the beneficiary.”

Aren’t you asking this Court to unnecessarily distort, through hyper-legal sophistry, the minor premise, in order to reach a conclusion that MERS is a beneficiary?  Isn’t the simplest conclusion really the better one?”


I have three concluding thoughts about the Niday-MERS cases; two underscoring the principle of Occam’s Razor, i.e. that the simplest solution is likely the most correct, and the third to answer a question posed by Justice Kistler.

1.      Kelly Harpster made the following observation about rebuttal argument that invites my comment:

“On rebuttal, Chaimov disagreed that the recording requirement protects subsequent purchasers because a separate provision of the Trust Deed Act already serves that function. The argument was interesting in light of the amici title companies’ plea that the court clarify whether bona fide purchasers are protected. Apparently MERS and its amici do not agree on whether the law is as clear as Chaimov asserted.

Responding to earlier questions from Justice Brewer, Chaimov argued that (contrary to case law and well-established principles of real property law) the trustee does not hold legal title to the trust deed. The trustee merely has a power of sale. Justice Kistler rightly asked whether, if true, the three party trust deed is really just a two-party mortgage. (A mortgage may only be foreclosed judicially in Oregon and is not subject to the Trust Deed Act.)”

First, let me say that Greg Chaimov is a very bright guy.  So why would he stumble on so basic a concept about Oregon trust deed law?  And why can’t the title and lending industries agree about whether subsequent purchasers are protected under MERS?  Why the confusion?  The answer is that even the best and the brightest can have trouble following the labyrinthine and often byzantine legal arguments necessary to put the square peg (□) of MERS into the round hole (o) of Oregon’s simple “beneficiary” definition.  Simpler is better – and less confusing.

2.    Next, is Kelly’s comment on the court itself:

“But half the panel asked no questions and even those justices that asked frequent questions appeared to still be struggling with how best to resolve all of the complex, interrelated questions raised by the parties. Ultimately, only time will tell when and how the court will decide these issues. In the meantime, Oregon waits.”

Why did half the panel ask no questions, and those that did, struggle?  Well, I know I would not ask a question if I didn’t fully understand the issues.  But remember, the entire panel had all of the briefing well in advance, and some of the best young law clerks available to help them grasp the “complex” issues.  They should have seemingly been completely immersed and familiar with the issues that have plagued Oregon’s foreclosure law for the past two years. [However, there is a saying that by remaining silent in times like these, no one really knows for sure that you don’t fully understand the issues; but when you speak up, you remove all doubt. – PCQ]

I submit, that as demonstrated by Judge Mosman’s flawed analysis in the Beyer case, MERS has become more adept at shape-shifting than an indigenous shaman; it’s hard to keep track of what they really are at any point in time. This is what happens when lawyers – and judges  – select the more complex answer over the simpler one.

3.  Herewith is Kelly’s description of a “lighter moment” prompted by Justice Kistler’s question:

“In one of the lighter moments of the argument, Justice Kistler asked Barnes what important public policy the MERS system undermines. When Barnes argued that recorded assignments protect title companies and their ability to insure title, Chief Justice Balmer chimed in asking why then title insurance companies are on MERS’ side. Barnes said he had no idea why, provoking quiet laughter from observers.”

The reason the title industry is on MERS’ side in this epic cage fight is because the two are figuratively connected at the hip.  Even though they seem to be strange bedfellows, the truth is that one cannot survive without the other.

The lending industry thrives on risk.  The title industry shuns risk. So what do they have in common? Answer: A symbiotic relationship – much like an oxpecker on a rhino – the sharp-eyed little bird enjoys a meal of ticks riding atop its huge host, and the rhino is warned by the better-sighted bird when danger approaches.  [Remember, this is just an explanation of symbiosis; not a metaphorical comment on the two industries…. PCQ]

In reality, the title industry needs the banking industry and vice versa.  Banks make loans for the purchase of homes.  Home buyers need the insurance that title companies provide.  [They are called “owner’s policies”, and in Oregon, are typically paid for by sellers.] So title companies depend on banks to make the loans to  home buyers who will then buy their insurance policies. In addition, banks also order title insurance for themselves when they make loans.  That way, if their security, i.e. the residence secured by their loan, has a cloud on title, the bank can make a claim under the insurance policy.  [These are called “lender policies.” Interestingly, they actually provide much better coverage to lenders than is found in the standard owner policies provided to borrowers.]  If lenders didn’t order these policies [which they make the buyer/borrower pay], title companies would lose a valuable customer, and source of revenue. So to put a fine point on it, for every home loan the bank makes, the title companies get two orders, one for the owner’s policy, and another for the lender’s policy. Not a bad deal for the title industry, thanks to the lending industry.

So, to answer Justice Kistler’s question to Jeff Barnes, when picking sides in the MERS-Niday battle, the title industry [think of the tiny little oxpecker] is not going to betray the lending industry [think of the big, cumbersome, poor-sighted, temperamental rhino] who provides it with sustenance.  [A much more graphic and darker, depiction of symbiosis, is found in the brains and brawn relationship of Master/Blaster in the post-apocalypse classic, Mad Max Beyond Thunderdome.  Again, no metaphorical analogies are intended…. PCQ]

Conclusion:  Well, perhaps we’re mercifully coming to the end of this macabre tragi-comedy called “The Mess That MERS Made.”  To quote Sam Elliot, The Stranger, at the end of the classic, The Big Lebowski:

“Welp, that about does her, wraps her all up. *** Made me laugh to beat the band. Parts, anyway. *** I guess that’s the way the whole durned human comedy keeps perpetuatin’ itself, down through the generations, westward the wagons, across the sands a time until– aw, look at me, I’m ramblin’ again. Wal, ah hope you folks enjoyed yourselves.”

[1] Actually, there were two cases argued that day; in the morning Brandrup v. ReconTrust Company, N.A was heard, and in the afternoon Niday v. GMAC Mortgage, LLC. I am referring them collectively as the “Niday case”, simply because it is the better known of the two. They both addressed the central  issue of whether MERS could act as a “beneficiary” under Oregon’s trust deed law.

[2] This fight was on October 1, 1975.  Back then title matches were 15 rounds.   The major boxing associations gradually limited title fights to 12 rounds in the 1980’s.

[3] Also known as “Ockham’s Razor.”

Posted in Legislation - Oregon, MERS, Miscellany, Real Estate/Distressed, Trust Deeds | Tagged , , , , ,
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