Opinion
111,539.
05-08-2015
EVERBANK, Appellee, v. Trevor R. GONZALES, et al., Appellants.
Shirla R. McQueen, of Sharp McQueen, P.A., of Liberal, for appellant Trevor R. Gonzales. Linda Tarpley, Wendy M. Green, and Sara N. Faubion, of Shapiro & Kreisman, LLC, of Fairway for appellee.
Shirla R. McQueen, of Sharp McQueen, P.A., of Liberal, for appellant Trevor R. Gonzales.
Linda Tarpley, Wendy M. Green, and Sara N. Faubion, of Shapiro & Kreisman, LLC, of Fairway for appellee.
Before MALONE, C.J., HILL and BUSER, JJ.
MEMORANDUM OPINION
PER CURIAM.
This is an appeal of the district court's grant of summary judgment tc Everbank allowing the bank to foreclose its mortgage. Trevor Gonzales contends Everbank has no standing to foreclose because it had been assigned the note and mortgage through the Mortgage Electronic Registration Systems, Inc., commonly called MERS. Gonzales is wrong.
We offer a brief summary of the facts.
Gonzales signed a promissory note and mortgage with BNC National Bank after receiving a loan. The mortgage was recorded on January 12, 2010. There was an assignment of mortgage from MERS to Everbank, which was filed on August 29, 2012. Everbank filed an action on August 1, 2012, seeking to:
(1) secure a judgment against Gonzales for $241,662.86, plus interest, due under the note; and
(2) foreclose on the mortgage, signed by Gonzales, securing the note.
The district court resolved the issues through a motion for summary judgment. Everbank filed a motion for summary judgment in December 2013. In his response to the motion, Gonzales admitted he executed the note and mortgage at issue. Gonzales also admitted less than one-third of the original note had been paid; the remaining balance plus interest was due and owing on the note. Gonzales asked the district court to deny the motion because Everbank did not have standing to foreclose on the note. He claimed Everbank failed to establish the legal right of MERS to assign the mortgage to Everbank, and there remained a disputed issue of material fact.
The district court found there was no disputed issue of fact that Gonzales signed a promissory note secured by a mortgage. There was also no disputed issue of fact that Gonzales defaulted on the note and he had failed to make payments under the note after December 1, 2011. The only issue before the district court was whether Everbank was the valid holder of the note and mortgage.
The district court noted: “At oral arguments on the summary judgment motion, [Everbank] brought the original note to court. Until that point in time, [Gonzales] did not know [Everbank] possessed the original note and by letter post oral argument, [Gonzales] does not dispute [Everbank] holds the original note.”
The district court held Everbank was “the valid holder of the original note and mortgage with a personal stake in the outcome of the controversy.” Gonzales defaulted on the note, and Everbank was entitled to enforce the note and mortgage. The court granted summary judgment in favor of Everbank.
The rules we will follow.
When the pleadings, depositions, answers to interrogatories, and admissions on file, together with the affidavits, show there is no genuine issue as to any material fact and the moving party is entitled to judgment as a matter of law, summary judgment is appropriate. The district court is required to resolve all facts and inferences which may reasonably be drawn from the evidence in favor of the party against whom the ruling is sought. When opposing a motion for summary judgment, an adverse party must come forward with evidence to establish a dispute as to a material fact. In order to preclude summary judgment, the facts subject to the dispute must be material to the conclusive issues in the case. On appeal, the same rules apply; summary judgment must be denied if reasonable minds could differ as to the conclusions drawn from the evidence. Stanley Bank v. Parish, 298 Kan. 755, 759, 317 P.3d 750 (2014). To the extent this case involves a jurisdiction question, that being whether Everbank has standing to bring this foreclosure action, review is unlimited. Board of Sumner County Comm'rs v. Bremby, 286 Kan. 745, Syl. ¶ 1, 189 P.3d 494 (2008).
In order to grant summary judgment in a mortgage foreclosure action, the district court must find undisputed evidence in the record that (1) the defendant signed a promissory note secured by a mortgage; (2) the plaintiff is the valid holder of the note and mortgage; and (3) the defendant has defaulted on the note. MetLife Home Loans v. Hansen, 48 Kan.App.2d 213, Syl. ¶ 1, 286 P.3d 1150 (2012).
In this appeal, Gonzales concedes: “There is no disputed issue of fact that [Gonzales] signed a promissory note secured by a mortgage, nor is there any disputed issue of fact that [Gonzales] defaulted on the note.” The only issue disputed is whether Everbank is the valid holder of the note and mortgage and has standing to foreclose on the subject property.
How MERS is involved.
The powers and obligations of the parties to a mortgage are set in the mortgage itself. Gonzales was the “Borrower,” and BNC the “Lender.” At issue here is the involvement of MERS. The mortgage provided the following: “This Security Instrument is given to [MERS] as Mortgagee. MERS is the nominee for Lender, as hereinafter defined, and Lender's successors and assigns.” The mortgage further provides:
“For this purpose, Borrower does hereby mortgage, grant and convey to MERS (solely as nominee for Lender and Lender's successors and assigns) and to the successors and assigns of MERS the following described property located in SEWARD.... 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 or canceling this Security Instrument.”
This instrument plainly confers upon MERS the rights to assign the mortgage to Everbank.
Everbank possessed the original note.
Gonzales concedes Everbank presented the original note in court. Under K.S.A.2014 Supp. 84–1–201(b)(21), “holder” is defined as:
“(A) The person in possession of a negotiable instrument that is payable either to bearer or to an identified person that is the person in possession; or
“(B) the person in possession of a negotiable tangible document of title if the goods are deliverable either to bearer or to the order of the person in possession; or
“(C) the person in control of a negotiable electronic document of title.”
See also K.S.A. 84–3–301 (the holder of an instrument is entitled to enforce it).
Everbank is in possession of the note and mortgage and is therefore the owner of the negotiable instruments.
One in possession of the note should be regarded as having a perfected security interest in that note, with the mortgage to follow. Army Nat'l Bank v. Equity Developers Inc., 245 Kan. 3, 18, 774 P.2d 919 (1989). “It is a well-established general rule that the possession of negotiable paper proves prima facie the ownership of the holder. [Citations omitted.]” King v. Bellamy, 82 Kan. 301, 302, 108 Pac. 117 (1910). As a valid holder of a note, a party has such an interest sufficient to give it standing in a foreclosure action. Hansen, 48 Kan.App.2d at 225. Under K.S.A. 84–3–308(b), once the validity of the signature is admitted, a plaintiff producing a promissory note is entitled to payment so long as plaintiff is the holder of the note and unless the defendant provides a defense. On default of a validly executed mortgage given to secure a loan on real estate, the payee is entitled to judgment for the amount due on its note and for foreclosure of its mortgage on the real estate securing the note. Daniels v. Army National Bank, 249 Kan. 654, 660–61, 822 P.2d 39 (1991).
Furthermore, Kansas law does not require an assignment in order to vest a party with a beneficial interest in the mortgage. A note and mortgage are transferable by mere delivery, without a written endorsement. Bank Western v. Henderson, 255 Kan. 343, 350, 874 P.2d 632 (1994). Delivery and possession are sufficient to establish ownership of a mortgage. 255 Kan. at 350. “An assignment of a mortgage is merely a formal transfer of title to the instrument.” Middlekauff v. Bell, 111 Kan. 206, 207, 207 Pac. 184 (1922). Under K.S.A. 58–2323, assignment of the mortgage carries with it assignment of the debt. The record of the mortgage is notice of its existence, and the holder of a note is not required to disclose ownership by recording the assignment in order to preserve priority of the lien. 111 Kan. at 212.
In U.S. Bank v. Howie, 47 Kan.App.2d 690, 280 P.3d 225 (2012), this court dealt with a very similar situation, with language identical to the language in Gonzales' mortgage. This court found:
“Generally, a mortgage is unenforceable when it is not held by the same entity that holds the promissory note. However, an exception exists where there is an agency relationship between the holder of the mortgage and the holder of the promissory note. In Landmark Nat'l Bank v. Kesler, 289 Kan. 528, 216 P.3d 158 (2009), the Kansas Supreme Court discussed the effect of ‘splitting’ a mortgage from the promissory note: “ ‘The practical effect of splitting the deed of trust [or mortgage] from the promissory note is to make it impossible for the holder of the note to foreclose, unless the holder of the deed of trust is the agent of the holder of the note. [Citation omitted.] Without the agency relationship, the person holding only the note lacks the power to foreclose in the event of default. The person holding only the deed of trust will never experience default because only the holder of the note is entitled to payment of the underlying obligation. [Citation omitted.] The mortgage loan becomes ineffectual when the note holder did not also hold the deed of trust.” [Citation omitted.]’ (Emphasis added.) Landmark, 289 Kan. at 540.” 47 Kan.App.2d at 695.
This court concluded that the plain language of the mortgage provided “sufficient and undisputed evidence that MERS was acting as an agent of U.S. Bank at all relevant times.” This court also held that as long as there is an agency relationship between MERS and the holder of the note during the time that MERS holds a mortgage “as nominee” for the “lender and its successors and assigns,” then there is not a severance between the note and mortgage. 47 Kan.App.2d at 702.
Everbank possessed the original note and produced it to the district court and to Gonzales for inspection. This possession is sufficient to establish standing to foreclose. See Hansen, 48 Kan.App.2d at 225. Gonzales presented no evidence that the note was owned by another person or entity on the date the action was filed or thereafter. Accordingly, Everbank has standing to bring the foreclosure action.
The holder of a promissory note is entitled to summary judgment upon default when they can show that the defendant signed a note secured by a mortgage, that the plaintiff is the valid holder of the note and mortgage, and the defendant has defaulted on the note. Hansen, 48 Kan.App.2d at 218. Thus, to be entitled to summary judgment, Everbank must show that there is no genuine issue of material fact in order to prove the necessary elements of a cause of action on the note.
Gonzales admitted execution of the note and mortgage, and it was uncontroverted that the note and mortgage were in default. Demand for payment has been made, but Gonzales has failed to pay. Everbank produced a true and accurate copy of the note and was the proven holder of the note; the note was secured as a matter of law. Everbank has met the requirements and is entitled to summary judgment.
Affirmed.