Here it is. On August 28, 2009 the Supreme Court of the State of Kansas rendered an opinion based calmly on existing law and relentlessly applying it to the chagrin of all participants in the securitization scheme. This decision is being examined, cited, analyzed and applied all over the country. MERS was the appellant seeking to invoke due process rights which it said were violated when they failed to get notice of the fact that their “interest” was being wiped out. The Court said simply that MERS — or any nominee” didn’t have any interest and proves its point by reference to simple statements in the documents and the simplest of laws and interpretation of the role of MERS and the requirements of recordation. The splitting of the note and mortgage creates an immediate and fatal flaw in title.
Title carriers take notice — all previous foreclosures falling within the scope of this opinion are subject to either compensation to the homeowner or reinstatement of the homeowner as possessor and owner of the home, or both. The implications of this ruling cannot be overstated — but neither should it be overused.
This is one state, but it is likely to serve as the basis for most appellate opinions rendered on securitized loans. The tide has turned. The moral of the story is that those encumbrances (mortgages) don’t exist in most cases, the foreclosures were all fatally flawed, the people who have been chased out of their homes, still own those homes, and the parties seeking to enforce the note can do so only as unsecured creditors and only if they prove that they lent the money that funded the loan and only if they are willing to be subject to counterclaims, cross claims, affirmative defenses and defenses of the borrower relating to predatory lending, appraisal fraud, securities fraud, rescission under all available theories of law, damages, treble damages, punitive damages, exemplary damages and consequential economic damages.
This is the start of what will be a long line of cases running through state courts and Federal Courts finding that MERS, the whole “Nominee” business plan, assignments from those without power to assign, splitting the note and mortgage making the mortgage unenforceable, necessary and indispensable parties, vacating judgments procured by fraud, and all the other basic black letter law flaws in the securitization of loans are exposed for what they are — a scheme that would and did wreak havoc on the notice and recording requirements of each and every state, a scheme whose execution created fatal flaws in title, and the intent to buy-pass the basic requirements of law in effect since at least the 17th century.
This case must be read multiple times and very carefully as it contains a succinct discussion of the decisions in other states. I will be referring to this case and analyzing it in the days ahead for our blog readers and for my clients who have retained me as an expert witness. I agree with every word in this opinion — a rarity and I am relying on it as corroboration for all my prior writing and expert opinions rendered in all cases across the country.
Kansas Opinions | Finding Aids: Case Name » Supreme Court or Court of Appeals | Docket Number | Release Date |IN THE SUPREME COURT OF THE STATE OF KANSAS
No. 98,489
LANDMARK NATIONAL BANK,
Plaintiff/Appellee,
v.
BOYD A. KESLER
Appellee/Cross-appellant
MILLENNIA MORTGAGE CORPORATION,
Defendant,
(MORTGAGE ELECTRONIC REGISTRATION
SYSTEMS, INC. AND SOVEREIGN BANK),
Appellants/Cross-appellees,
and
DENNIS BRISTOW AND TONY WOYDZIAK,
Intervenors/Appellees.
SYLLABUS BY THE COURT
1. Denial of a motion to set aside default judgment is subject to review under a standard of abuse of discretion. A district court decision that denies a motion to join a party as a necessary party under K.S.A. 60-219(a) is also subject to an abuse of discretion standard of review.
2. Whether the evidence demonstrates that the statutory requirements for joinder have been met is a mixed question of fact and law. When reviewing a mixed question of fact and law, an appellate court reviews the district court’s factual findings for substantial competent evidence and reviews de novo the district court’s legal conclusions.
3. Intervention as a matter of right is subject to the same mixed determination of law and fact as is joinder. Permissive intervention lies within the discretion of the district court.4. Judicial discretion is abused when no reasonable person would take the view adopted by the trial court. Review for abuse of discretion includes review to determine whether erroneous legal conclusions guided the exercise of discretion.
5. K.S.A. 60-255(b) does not require that the party moving for relief from default judgment be a party to the action.
6. It is appropriate for a trial court to consider evidence beyond the bare pleadings to determine whether it should set aside a default judgment. In a motion to set aside default, a trial court should consider a variety of factors to determine whether the defendant or would-be defendant had a meritorious defense, and the burden of establishing a meritorious defense rests with the moving party.
7. Relief under K.S.A. 60-255(b) is appropriate only upon a showing that if relief is granted the outcome of the suit may be different than if the entry of default or the default judgment is allowed to stand; the showing should underscore the potential injustice of allowing the case to be disposed of by default. In most cases the court will require the party in default to demonstrate a meritorious defense to the action as a prerequisite to vacating the default entry or judgment. The nature and extent of the showing that will be necessary lie within the trial court’s discretion.
8. The law relating to a contingently necessary party closely resembles the law relating to vacating default judgment, in that both require the party asserting the interest to demonstrate a meritorious defense or an interest that may be impaired.
9. The word “nominee” is subject to more than one interpretation. The legal significance of the word depends on the context in which it is used. The word encompasses a range of meanings from a straw man or limited agent to a representative enjoying the same legal rights as the party that acts as the nominator.
10. The law generally understands that a mortgagee is not distinct from a lender: a mortgagee is a party to whom property is mortgaged, which is to say, a mortgage creditor or lender. A mortgagee and a lender have intertwined rights that defy a clear separation of interests.
11. Parties are bound by the formal admissions of their counsel in an action.
12. The Due Process Clause does not protect entitlements where the identity of the alleged entitlement is vague. A protected property right must have some ascertainable monetary value. An entitlement to a procedure does not constitute a protected property interest.
Review of the judgment of the Court of Appeals in 40 Kan. App. 2d 325, 192 P.3d 177 (2008). Appeal from Ford District Court; E. LEIGH HOOD, judge. Judgment of the Court of Appeals affirming the district court is affirmed. Judgment of the district court is affirmed. Opinion filed August 28, 2009.
Tyson C. Langhofer and Court T. Kennedy, of Stinson Morrison Hecker, L.L.P., of Wichita, for appellants/cross-appellees.
Ted E. Knopp, of Ted E. Knopp, Chartered, of Wichita, for appellee Boyd A. Kesler.
David A. Schatz, of Husch Blackwell Sanders L.L.P., of Kansas City, Missouri, for amicus curiae American Land Title Association.
The opinion of the court was delivered by
ROSEN, J.: Mortgage Electronic Registration Systems, Inc. (MERS) and Sovereign Bank seek review of an opinion by our Court of Appeals holding that a nonlender is not a contingently necessary party in a mortgage foreclosure action and that due process does not require that a nonlender be allowed to intervene in a mortgage foreclosure action.
The facts underlying this appeal are not in dispute. On March 19, 2004, Boyd Kesler secured a loan of $50,000 from Landmark National Bank (Landmark) with a mortgage registered in Ford County, Kansas. On March 15, 2005, he secured an additional loan of $93,100 from Millennia Mortgage Corp. (Millennia) through a second mortgage registered in Ford County. Both mortgages were secured by the same real property located in Ford County.
The second mortgage lies at the core of this appeal. That mortgage document stated that the mortgage was made between Kesler–the “Mortgagor” and “Borrower”–and MERS, which was acting “solely as nominee for Lender, as hereinafter defined, and Lender’s successors and assigns.” The document then identified Millennia as the “Lender.” At some subsequent time, the mortgage may have been assigned to Sovereign and Sovereign may have taken physical possession of the note, but that assignment was not registered in Ford County.
On April 13, 2006, Kesler filed for bankruptcy in the United States Bankruptcy Court for the District of Kansas, Wichita Division. He named Sovereign as a creditor; although he claimed the secured property as exempt, he filed an intention to surrender the property. The bankruptcy court discharged his personal liability on November 16, 2006. The record contains little documentation or evidence explaining the interplay of the bankruptcy and the foreclosure action, except to suggest that the bankruptcy action may have given Sovereign constructive notice of a possible default on payments.
On July 27, 2006, Landmark filed a petition to foreclose on its mortgage, serving and naming as defendants Kesler and Millennia. It did not serve notice of the litigation on MERS or Sovereign. In the absence of answers from either defendant, the trial court entered default judgment against Kesler and Millennia on September 6, 2006. The trial court then filed an order of sale on September 29, 2006. Notice of the sale was initially published in the Dodge City Daily Globe on October 4, 2006. On October 26, 2006, Dennis Bristow and Tony Woydziak purchased the secured property at a sheriff’s sale for $87,000, and on November 14, 2006, Landmark filed a motion to confirm sale of the secured property.
Also on November 14, 2006, Sovereign filed an answer to the foreclosure petition, asserting an interest in the real property as the successor in interest to Millennia’s second mortgage. A week later, on November 21, 2006, Sovereign filed a motion to set aside or vacate the default judgment and an objection to confirmation of sale. The motion asserted that MERS was a K.S.A. 60-219(a) contingently necessary party and, because Landmark failed to name MERS as a defendant, Sovereign did not receive notice of the proceedings. The motion asked the court to vacate the default judgment under K.S.A. 60-260(b). The motion further asked the court to set aside the surplus from the sale, holding it to later to be paid to Sovereign if the court elected not to grant the motion to vacate.
On November 27, 2006, Kesler filed a motion seeking distribution of surplus funds from the sheriff’s sale, and on January 3, 2007, Kesler filed a motion joining Landmark’s earlier motion to confirm the sheriff’s sale. The trial court conducted a hearing on the various motions on January 8, 2007, at which counsel for Landmark, Kesler, Sovereign, and Bristow appeared and presented their cases. The trial court deferred judgment pending review of the pleadings.
On January 16, 2007, MERS filed a motion joining Sovereign’s motion to vacate the journal entry of default judgment and objecting to confirmation of the sheriff’s sale, followed on January 18, 2007, by a motion to intervene under K.S.A. 60-224. MERS proffered an answer and a cross-claim to the original foreclosure petition.
On that same date, the trial court filed an order finding that MERS was not a real party in interest and Landmark was not required to name it as a party to the foreclosure action. The court found that MERS served only as an agent or representative for Millennia. The court also found that Sovereign’s failure to register its interest with the Ford County Register of Deeds precluded it from asserting rights to the mortgage after judgment had been entered. The court denied the motions to set aside judgment and to intervene and granted the motions to confirm the sale and to distribute the surplus.
On February 1, 2007, MERS and Sovereign filed motions to reconsider. The trial court conducted a hearing on those motions, at which counsel for Kesler, Sovereign, and MERS appeared and argued. The trial court subsequently entered an order denying the motions to reconsider. MERS and Sovereign filed timely notices of appeal.
Prior to the appellants submitting their briefs, the purchasers Bristow and Woydziak filed a motion with the Court of Appeals seeking leave to intervene in the appeal. The Court of Appeals granted the motion. Bristow and Woydziak then filed a motion to compel the office of the Clerk of the Appellate Courts to docket their cross-appeal, which the Court of Appeals denied. The Court of Appeals affirmed the district court in Landmark National Bank v. Kesler, 40 Kan. App. 2d 325, 192 P.3d 177 (2008). This court granted the appellants’ petition for review.
I. Did The District Court Abuse Its Discretion In Denying MERS’s Motion To Set Aside Default Judgment And Motion To Intervene As A Contingently Necessary Party?
A. Standard of Review
Denial of a motion to set aside a default judgment is subject to review under a standard of abuse of discretion. See Canaan v. Bartee, 272 Kan. 720, Syl. ¶ 9, 35 P.3d 841 (2001). A district court decision that denies a motion to join a party as a necessary party under K.S.A. 60-219(a) is also subject to an abuse of discretion standard of review. State ex rel. Graeber v. Marion County Landfill, Inc., 276 Kan. 328, 352, 76 P.3d 1000 (2003). Whether the evidence demonstrates that the statutory requirements for joinder have been met is a mixed question of fact and law. When reviewing a mixed question of fact and law, an appellate court reviews the district court’s factual findings for substantial competent evidence and reviews de novo the district court’s legal conclusions. State v. Fisher, 283 Kan. 272, 286, 154 P.3d 455 (2007).
Intervention as a matter of right is subject to the same mixed determination of law and fact as is joinder. K.S.A. 60-224(a). Permissive intervention lies within the discretion of the district court. K.S.A. 60-224(b); see Stringfellow v. Concerned Neighbors in Action, 480 U.S. 370, 382 n.1, 94 L. Ed. 2d 389, 107 S. Ct. 1177 (1987) (Brennan, J., concurring) (discussing the different standards applied to Federal Rule of Civil Procedure 24[a] and [b]).
Judicial discretion is abused when no reasonable person would take the view adopted by the trial court. Harsch v. Miller, 288 Kan. 280, 293, 200 P.3d 467 (2009). Review for abuse of discretion includes review to determine whether erroneous legal conclusions guided the exercise of discretion. State v. Skolaut, 286 Kan. 219, Syl. ¶ 3, 182 P.3d 1231 (2008).
To the extent that this appeal requires interpretation of statutory mandates, this court exercises unlimited review. See Genesis Health Club, Inc. v. City of Wichita, 285 Kan. 1021, 1031, 181 P.3d 549 (2008).
B. Analysis
While this is a matter of first impression in Kansas, other jurisdictions have issued opinions on similar and related issues, and, while we do not consider those opinions binding in the current litigation, we find them to be useful guideposts in our analysis of the issues before us.
At the heart of this issue is whether the district court abused its discretion in refusing to set aside the default judgment and in refusing to join MERS as a contingently necessary party.
The statutory provision for setting aside a default judgment is K.S.A. 60-255(b), which refers to K.S.A. 60-260(b), relating to relief from judgment, in a manner similar to the correlation between the corresponding federal rules, Fed. R. Civ. Proc. 55(c) and 60(b). K.S.A. 60-260(b) allows relief from a judgment based on mistake, inadvertence, surprise, or excusable neglect; newly discovered evidence that could not have been timely discovered with due diligence; fraud or misrepresentation; a void judgment; a judgment that has been satisfied, released, discharged, or is no longer equitable; or any other reason justifying relief from the operation of the judgment. K.S.A. 60-260(b) requires that the motion be made by a party or by a representative who is in privity with a party, thus precluding a nonparty of standing to file such a motion. K.S.A. 60-255(b) does not, however, require that the movant be a party to the action. See 11 Wright, Miller & Kane, Federal Practice & Procedure: Civil 2d § 2865 (1995).
It is appropriate–and probably necessary–for a trial court to consider evidence beyond the bare pleadings to determine whether it should set aside a default judgment. In a motion to set aside default, a trial court should consider a variety of factors to determine whether the defendant (or would-be defendant) had a meritorious defense, and the burden of establishing a meritorious defense rests with the moving party. See Canaan v. Bartee, 272 Kan. 720, 731, 35 P.3d 841 (2001).
This conclusion is consistent with the construction of the parallel federal rules:
“Generally, a federal court will grant a motion under Rule 55(c) only after some showing is made that if relief is granted the outcome of the suit may be different than if the entry of default or the default judgment is allowed to stand; the showing should underscore the potential injustice of allowing the case to be disposed of by default. In most cases, therefore, the court will require the party in default to demonstrate a meritorious defense to the action as a prerequisite to vacating the default entry or judgment. . . .
“A majority of the courts . . . have insisted upon a presentation of some factual basis for the supposedly meritorious defense. . . .
“The demonstration of a meritorious defense is not expressly called for by the federal rules and, therefore, the nature and extent of the showing that will be necessary is a matter that lies within the court’s discretion. . . . The underlying concern is to determine whether there is some possibility that the outcome of the suit after a full trial will be contrary to the result achieved by the default.” (Emphasis added.) 10A Wright, Miller & Kane, Federal Practice & Procedure: Civil 3d § 2697 (1998).
We accordingly find that it was incumbent on the trial court, when ruling on the motion to set aside default judgment, to consider whether MERS would have had a meritorious defense if it had been named as a defendant and whether there was some reasonable possibility MERS would have enjoyed a different outcome from the trial if its participation had precluded default judgment.
In determining whether MERS was a contingently necessary party that was entitled to relief from judgment, the trial court was required to consider the factors of K.S.A. 60-219(a) in addition to those of K.S.A. 60-260(b).
K.S.A. 60-219(a) defines which parties are to be joined in an action as necessary for just adjudication:
“A person is contingently necessary if (1) complete relief cannot be accorded in his absence among those already parties, or (2) he claims an interest relating to the property or transaction which is the subject of the action and he is so situated that the disposition of the action in his absence may (i) as a practical matter substantially impair or impede his ability to protect that interest or (ii) leave any of the persons already parties subject to a substantial risk of incurring double, multiple, or otherwise inconsistent obligations by reason of his claimed interest.”
The law relating to a contingently necessary party closely resembles the law relating to vacating a default judgment, in that both require the party asserting the interest to demonstrate a meritorious defense or an interest that may be impaired. In order to prevail on appeal, MERS must demonstrate that the trial court abused its discretion when it found, based on the testimony, evidence, and pleadings before the court at the time when it considered the motion to set aside default judgment, that MERS lacked a meritorious defense to the foreclosure proceeding or had an interest that could be impaired. We will accordingly examine the nature of the interest in the mortgage that MERS has demonstrated.
Sovereign is a financial institution that putatively purchased the Kesler mortgage from Millennia but did not register the transaction in Ford County. The relationship of MERS to the transaction is not subject to an easy description. One court has described MERS as follows:
“MERS is a private corporation that administers the MERS System, a national electronic registry that tracks the transfer of ownership interests and servicing rights in mortgage loans. Through the MERS System, MERS becomes the mortgagee of record for participating members through assignment of the members’ interests to MERS. MERS is listed as the grantee in the official records maintained at county register of deeds offices. The lenders retain the promissory notes, as well as the servicing rights to the mortgages. The lenders can then sell these interests to investors without having to record the transaction in the public record. MERS is compensated for its services through fees charged to participating MERS members.” Mortgage Elec. Reg. Sys., Inc. v. Nebraska Depart. of Banking, 270 Neb. 529, 530, 704 N.W.2d 784 (2005).
The second mortgage designated the relationships of Kesler, MERS, and Millennia and established payment and notice obligations. That document purported to define the role played by MERS in the transaction and the contractual rights of the parties.
The document began by identifying the parties:“THIS MORTGAGE is made this 15th day of March 2005, between the Mortgagor, BOYD A. KESLER, (herein ‘Borrower’), and the Mortgagee, Mortgage Electronic Registration Systems, Inc. (‘MERS’), (solely as nominee for Lender, as hereinafter defined, and Lender’s successors and assigns). MERS is organized and existing under the laws of Delaware, and has an address and telephone number of P.O. Box 2026, Flint, MI 48501-2026, tel. (888) 679-MERS. MILLENNIA MORTGAGE CORP., A CALIFORNIA CORPORATION is organized and existing under the laws of CALIFORNIA and has an address of 23046 AVENIDA DE LA CARLOTA #100, LAGUNA HILLS, CALIFORNIA 92653 (herein ‘Lender’).”
The third paragraph of the first page of the mortgage document conveyed a security interest in real estate:
“TO SECURE to Lender the repayment of the indebtedness evidenced by the Note, with interest thereon; the payment of all other sums, with interest thereon, advanced in accordance herewith to protect the security of this Mortgage; and the performance of the covenants and agreements of Borrower herein contained, 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 the County of FORD, State of Kansas.”
The first paragraph of the second page of the mortgage document contains the following language that apparently both limits and expands MERS’s rights:
“Borrower understands and agrees that MERS holds only legal title to the interests granted by Borrower in this Mortgage; 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 and 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 cancelling this Mortgage.”
Paragraph 7 of the mortgage document provides the lender with the right to protect the security:
“If Borrower fails to perform the covenants and agreements contained in this Mortgage, or if any action or proceeding is commenced which materially affects Lender’s interest in the Property, then Lender, at Lender’s option, upon notice to Borrower, may make such appearances, disburse such sums, including reasonable attorneys’ fees, and take such action as is necessary to protect Lender’s interest.”
Paragraph 9 of the mortgage document provides the lender with rights in the event of a condemnation:
“Condemnation. The proceeds of any award or claim for damages, direct or consequential, in connection with any condemnation or other taking of the Property, or part thereof, or for conveyance in lieu of condemnation, are hereby assigned and shall be paid to Lender, subject to the terms of any mortgage, deed of trust or other security agreement with a lien which has priority over this mortgage.”
Paragraph 12 of the mortgage document addresses notice:
“Notice. Except for any notice required under applicable law to be given in another manner, (a) any notice to Borrower provided for in this Mortgage shall be given by delivering it or by mailing such notice by certified mail addressed to Borrower at the Property Address or at such other address as Borrower may designate by notice to Lender as provided herein, and (b) any notice to Lender shall be given by certified mail to Lender’s address stated herein or to such other address as Lender may designate by notice to Borrower as provided herein. Any notice provided for in this Mortgage shall be deemed to have been given to Borrower or Lender when given in the manner designated herein.” (Emphasis added.)
The signature page of the mortgage document contains language relating to notice in the event of default:
“Borrower and Lender request the holder of any mortgage, deed of trust or other encumbrance with a lien which has priority over this Mortgage to give Notice to Lender, at Lender’s address set forth on page one of this Mortgage, of any default under the superior encumbrance and of any sale or other foreclosure action.” (Emphasis added.)
The mortgage instrument states that MERS functions “solely as nominee” for the lender and lender’s successors and assigns. The word “nominee” is defined nowhere in the mortgage document, and the functional relationship between MERS and the lender is likewise not defined. In the absence of a contractual definition, the parties leave the definition to judicial interpretation.
What meaning is this court to attach to MERS’s designation as nominee for Millennia? The parties appear to have defined the word in much the same way that the blind men of Indian legend described an elephant–their description depended on which part they were touching at any given time. Counsel for Sovereign stated to the trial court that MERS holds the mortgage “in street name, if you will, and our client the bank and other banks transfer these mortgages and rely on MERS to provide them with notice of foreclosures and what not.” He later stated that the nominee “is the mortgagee and is holding that mortgage for somebody else.” At another time he declared on the record that the nominee
“is more like a trustee or more like a corporation, a trustee that has multiple beneficiaries. Now a nominee’s relationship is not a trust but if you have multiple beneficiaries you don’t serve one of the beneficiaries you serve the trustee of the trust. You serve the agent of the corporation.”
Counsel for the auction property purchasers stated that a nominee is “one designated to act for another as his representative in a rather limited sense.” He later deemed a nominee to be “like a power of attorney.”
Black’s Law Dictionary defines a nominee as “[a] person designated to act in place of another, usu. in a very limited way” and as “[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). This definition suggests that a nominee possesses few or no legally enforceable rights beyond those of a principal whom the nominee serves.
In its opinion below, the Court of Appeals cited Thompson v. Meyers, 211 Kan. 26, 30, 505 P.2d 680 (1973), which provides the only discussion in Kansas of the legal significance of a nominee:
“In common parlance the word ‘nominee’ has more than one meaning. Much depends on the frame of reference in which it is used. In Webster’s Third New International Dictionary, unabridged, one of the definitions given is ‘a person named as the recipient in an annuity or grant.’ We view a ‘nominee’, as the term was used by the parties here, not simply in the sense of a straw man or limited agent. . . , but in the larger sense of a person designated by them to purchase the real estate, who would possess all the rights given a buyer . . . .”
The legal status of a nominee, then, depends on the context of the relationship of the nominee to its principal. Various courts have interpreted the relationship of MERS and the lender as an agency relationship. See In re Sheridan, ___ B.R. ___, 2009 WL 631355, at *4 (Bankr. D. Idaho March 12, 2009) (MERS “acts not on its own account. Its capacity is representative.”); Mortgage Elec. Registration System, Inc. v. Southwest, ___ Ark. ___, ___, ___ S.W.3d ___, 2009 WL 723182 (March 19, 2009) (“MERS, by the terms of the deed of trust, and its own stated purposes, was the lender’s agent”); LaSalle Bank Nat. Ass’n v. Lamy, 2006 WL 2251721, at *2 (N.Y. Sup. 2006) (unpublished opinion) (“A nominee of the owner of a note and mortgage may not effectively assign the note and mortgage to another for want of an ownership interest in said note and mortgage by the nominee.”)
The relationship that MERS has to Sovereign is more akin to that of a straw man than to a party possessing all the rights given a buyer. A mortgagee and a lender have intertwined rights that defy a clear separation of interests, especially when such a purported separation relies on ambiguous contractual language. The law generally understands that a mortgagee is not distinct from a lender: a mortgagee is “[o]ne to whom property is mortgaged: the mortgage creditor, or lender.” Black’s Law Dictionary 1034 (8th ed. 2004). By statute, assignment of the mortgage carries with it the assignment of the debt. K.S.A. 58-2323. Although MERS asserts that, under some situations, the mortgage document purports to give it the same rights as the lender, the document consistently refers only to rights of the lender, including rights to receive notice of litigation, to collect payments, and to enforce the debt obligation. The document consistently limits MERS to acting “solely” as the nominee of the lender.
Indeed, in the event that a mortgage loan somehow separates interests of the note and the deed of trust, with the deed of trust lying with some independent entity, the mortgage may become unenforceable.
“The practical effect of splitting the deed of trust 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.” Bellistri v. Ocwen Loan Servicing, LLC, 284 S.W.3d 619, 623 (Mo. App. 2009).
The Missouri court found that, because MERS was not the original holder of the promissory note and because the record contained no evidence that the original holder of the note authorized MERS to transfer the note, the language of the assignment purporting to transfer the promissory note was ineffective. “MERS never held the promissory note, thus its assignment of the deed of trust to Ocwen separate from the note had no force.” 284 S.W.3d at 624; see also In re Wilhelm, 407 B.R. 392 (Bankr. D. Idaho 2009) (standard mortgage note language does not expressly or implicitly authorize MERS to transfer the note); In re Vargas, 396 B.R. 511, 517 (Bankr. C.D. Cal. 2008) (“[I]f FHM has transferred the note, MERS is no longer an authorized agent of the holder unless it has a separate agency contract with the new undisclosed principal. MERS presents no evidence as to who owns the note, or of any authorization to act on behalf of the present owner.”); Saxon Mortgage Services, Inc. v. Hillery, 2008 WL 5170180 (N.D. Cal. 2008) (unpublished opinion) (“[F]or there to be a valid assignment, there must be more than just assignment of the deed alone; the note must also be assigned. . . . MERS purportedly assigned both the deed of trust and the promissory note. . . . However, there is no evidence of record that establishes that MERS either held the promissory note or was given the authority . . . to assign the note.”).
What stake in the outcome of an independent action for foreclosure could MERS have? It did not lend the money to Kesler or to anyone else involved in this case. Neither Kesler nor anyone else involved in the case was required by statute or contract to pay money to MERS on the mortgage. See Sheridan, ___ B.R. at ___ (“MERS is not an economic ‘beneficiary’ under the Deed of Trust. It is owed and will collect no money from Debtors under the Note, nor will it realize the value of the Property through foreclosure of the Deed of Trust in the event the Note is not paid.”). If MERS is only the mortgagee, without ownership of the mortgage instrument, it does not have an enforceable right. See Vargas, 396 B.R. 517 (“[w]hile the note is ‘essential,’ the mortgage is only ‘an incident’ to the note” [quoting Carpenter v. Longan, 16 Wall. 271, 83 U.S. 271, 275, 21 L. Ed 313 (1872)]).
When it found that MERS did not have an interest in the property that was impaired by the default judgment, the trial court properly considered four factors: (1) that the written pleadings and oral arguments by MERS and Sovereign identified MERS as acting only as a digital mortgage tracking service; (2) that counsel for MERS insisted that no evidence of a financial or property interest was necessary and its argument rested solely on its identity as the mortgagee on the mortgage document, when counsel was directly challenged to produce evidence of a financial or property interest; (3) that evidence showed that Sovereign was on notice that Landmark had leave of the bankruptcy court to proceed with foreclosure and that MERS did not attempt to intervene in the action until after its alleged principal, Sovereign, had already had its motion to intervene and to set aside judgment denied; and (4) that the case law submitted by the parties weighed more in favor of denying the motion. These factors were properly before the trial court and were consistent with the evidence and supported the court’s legal reasoning.
Counsel for MERS explicitly declined to demonstrate to the trial court a tangible interest in the mortgage. Parties are bound by the formal admissions of their counsel in an action. Dick v. Drainage District No. 2, 187 Kan. 520, 525, 358 P.2d 744 (1961). Counsel for MERS made no attempt to show any injury to MERS resulting from the lack of service; in fact, counsel insisted that it did not have to show a financial or property interest.
MERS argued in another forum that it is not authorized to engage in the practices that would make it a party to either the enforcement of mortgages or the transfer of mortgages. In Mortgage Elec. Reg. Sys. v. Nebraska Dept. of Banking, 270 Neb. 529, 704 N.W.2d 784 (2005), MERS challenged an administrative finding that it was a mortgage banker subject to license and registration requirements.
The Nebraska Supreme Court found in favor of MERS, noting that “MERS has no independent right to collect on any debt because MERS itself has not extended credit, and none of the mortgage debtors owe MERS any money.” 270 Neb. at 535. The Nebraska court reached this conclusion based on the submissions by counsel for MERS that
“MERS does not take applications, underwrite loans, make decisions on whether to extend credit, collect mortgage payments, hold escrows for taxes and insurance, or provide any loan servicing functions whatsoever. MERS merely tracks the ownership of the lien and is paid for its services through membership fees charged to its members. MERS does not receive compensation from consumers.” 270 Neb. at 534.
Even if MERS was technically entitled to notice and service in the initial foreclosure action–an issue that we do not decide at this time–we are not compelled to conclude that the trial court abused its discretion in denying the motions to vacate default judgment and require joinder of MERS and Sovereign. The record lacks evidence supporting a claim that MERS suffered prejudice and would have had a meritorious defense had it been joined as a defendant to the foreclosure action. We find that the trial court did not abuse its discretion and did not commit reversible error in ruling on the postdefault motions.
We note that various arguments were presented suggesting that economic policy provides independent grounds for reversing the trial court. MERS and the amicus curiae American Land Title Association argue that MERS provides a cost-efficient method of tracking mortgage transactions without the complications of county-by-county registration and title searches. The amicus suggests the statutory recording system is grounded in seventeenth-century property law that is entirely unsuited to twentieth-century financial transactions. While this may be true, the MERS system introduces its own problems and complications.
One such problem is that having a single front man, or nominee, for various financial institutions makes it difficult for mortgagors and other institutions to determine the identity of the current note holder.
“[I]t is not uncommon for notes and mortgages to be assigned, often more than once. When the role of a servicing agent acting on behalf of a mortgagee is thrown into the mix, it is no wonder that it is often difficult for unsophisticated borrowers to be certain of the identity of their lenders and mortgagees.” In re Schwartz, 366 B.R. 265, 266 (Bankr. D. Mass. 2007).
“[T]he practices of the various MERS members, including both [the original lender] and [the mortgage purchaser], in obscuring from the public the actual ownership of a mortgage, thereby creating the opportunity for substantial abuses and prejudice to mortgagors . . . , should not be permitted to insulate [the mortgage purchaser] from the consequences of its actions in accepting a mortgage from [the original lender] that was already the subject of litigation in which [the original lender] erroneously represented that it had authority to act as mortgagee.” Johnson, 2008 WL 4182397, at *4.
The amicus argues that “[a] critical function performed by MERS as the mortgagee is the receipt of service of all legal process related to the property.” The amicus makes this argument despite the mortgage clause that specifically calls for notice to be given to the lender, not the putative mortgagee. In attempting to circumvent the statutory registration requirement for notice, MERS creates a system in which the public has no notice of who holds the obligation on a mortgage.
The Arkansas Supreme Court has noted:
“The only recorded document provides notice that [the original lender] is the lender and, therefore, MERS’s principal. MERS asserts [the original lender] is not its principal. Yet no other lender recorded its interest as an assignee of [the original 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.” Southwest Homes, ___ Ark. at ___.
In any event, the legislature has established a registration requirement for parties that desire service of notice of litigation involving real property interests. It is not the duty of this court to criticize the legislature or to substitute its view on economic or social policy. Samsel v. Wheeler Transport Services, Inc., 246 Kan. 336, 348, 789 P.2d 541 (1990).
II. Did The Trial Court’s Refusal To Join MERS As A Party Violate MERS’s Right To Due Process?
MERS contends that the Fourteenth Amendment and §18 of the Kansas Constitution Bill of Rights guarantees of due process were violated when the foreclosure action was consummated without MERS receiving notice of the proceeding and without MERS having the opportunity to intervene in the action.
Although joinder is evaluated under an abuse of discretion standard, if a constitutional right is involved the trial judge’s exercise of discretion is limited. Discretion must be exercised not in opposition to, but in accordance with, established principles of law. It is not an arbitrary power. In re Adoption of B.G.J., 281 Kan. 552, 563, 133 P.3d 1 (2006).
The Fourteenth Amendment to the United States Constitution provides: “No State shall make or enforce any law which shall abridge the privileges or immunities of citizens of the United States; nor shall any State deprive any person of life, liberty, or property, without due process of law.”
Section 18 of the Kansas Constitution Bill of Rights provides: “All persons, for injuries suffered in person, reputation or property, shall have remedy by due course of law, and justice administered without delay.”
Due process provides any interested party with the elementary and fundamental right to notice of the pendency of an action and the opportunity to present its objections in any proceeding that is to be accorded finality. Alliance Mortgage Co. v. Pastine, 281 Kan. 1266, 1275, 136 P.3d 457 (2006) (citing Mullane v. Central Hanover Tr. Co., 339 U.S. 306, 314, 94 L. Ed. 865, 70 S. Ct. 652 [1950]). In the absence of a protected property or liberty interest, there can be no due process violation. State ex rel. Tomasic v. Unified Gov’t of Wyandotte County/Kansas City, 265 Kan. 779, 809, 962 P.2d 543 (1998).
The Due Process Clause does not protect entitlements where the identity of the alleged entitlement is vague. Castle Rock v. Gonzales, 545 U.S. 748, 763, 162 L. Ed. 2d 658, 125 S. Ct. 2796 (2005). A protected property right must have some ascertainable monetary value. 545 U.S. at 766. Indirect monetary benefits do not establish protection under the Fourteenth Amendment. 545 U.S. at 767. An entitlement to a procedure does not constitute a protected property interest. 545 U.S. at 764.
MERS’s contention that it was deprived of due process in violation of constitutional protections runs aground in the shallows of its property interest. As noted in the discussion of the first issue above, MERS did not demonstrate, in fact, did not attempt to demonstrate, that it possessed any tangible interest in the mortgage beyond a nominal designation as the mortgagor. It lent no money and received no payments from the borrower. It suffered no direct, ascertainable monetary loss as a consequence of the litigation. Having suffered no injury, it does not qualify for protection under the Due Process Clause of either the United States or the Kansas Constitutions.
Furthermore, MERS received the full opportunity to present arguments and evidence to the trial court. Only after Sovereign clearly had notice of the litigation, had filed a motion to intervene, and had participated in a hearing on the motion did MERS–Sovereign’s nominee–elect to file for joinder. Despite its late decision to enter an appearance in the case, the trial court allowed MERS the opportunity to present arguments and evidence. It cannot be said that MERS was prejudicially denied notice and the opportunity to be heard.
We find that the district court did not abuse its discretion in denying the motions to vacate and for joinder and in holding that MERS was not denied due process. We accordingly affirm the district court and the Court of Appeals.
END
Filed under: bubble, CDO, currency, Eviction, foreclosure, GTC | Honor, Investor, Mortgage | Tagged: bankruptcy, borrower, disclosure, foreclosure, foreclosure defense, foreclosure offense, fraud, Lender Liability, lenders, Mortgage, predatory lending, quiet title, rescission, RESPA, RICO, securitization, trustee |
1st time here.
Its interesting how almost everyone here really believes the banksters loan “money”. I once worked for an “old time” CPA and he always said “go back to the begining”. The beginning of most bank loans start at the” FED”. Here is the law; USC TITLE 12 so you can actually for the first time ever see where the “MONEY” comes from. Chances are pretty good the house you bought was built with construction financing. This statute proves the banksters never loaned ” REAL MONEY” in the beginning. So how can they foreclose on REAL PROPERTY if they never loaned “REAL MONEY” from the beginning?
THEY CAN”T!!!!!!!
Is anyone using the “MONEY” issue?
Hope this may help someone.
12 USC Sec. 371
01/05/2009
-EXPCITE-
TITLE 12 – BANKS AND BANKING
CHAPTER 3 – FEDERAL RESERVE SYSTEM
SUBCHAPTER X – POWERS AND DUTIES OF MEMBER BANKS
-HEAD-
Sec. 371. Real estate loans
-STATUTE-
(a) Authorization to make real estate loans; orders, rules, and regulations of Comptroller of the Currency
Any national banking association may make, arrange, purchase or sell loans or extensions of credit secured by liens on interests in real estate, subject to section 1828(o) of this title and such restrictions and requirements as the Comptroller of the Currency
may prescribe by regulation or order.
(b) Eligibility for discount as commercial paper of NOTES REPRESENTING LOANS financing construction of residential or farm buildings; prerequisites
NOTES REPRESENTING LOANS made under this section to finance the construction of residential or farm buildings and having maturities not to exceed nine months shall be eligible for discount as
commercial paper within the terms of the first paragraph of section 343 of this title if accompanied by a valid and binding agreement to advance the full amount of the loan upon the completion of the
building entered into by an individual, partnership, association, or corporation acceptable to the discounting bank.
jacknards56@gmail.com
This is very exciting….Since there is a attorney in Flordia that has done alot because of MERS. Everyone needs to look at there foreclosure paper work and see if it has MERS on it. Now who has advise for a lendor that gave it to Fanny Mae. Now what do you do in that case? Who is a attorney in California that knows about MERS and will help you? if it is with Fanny Mae now?
Neil cites: Bellistri v. Ocwen Loan Servicing, LLC, 284 S.W.3d 619 (Mo. App., 2009) In his article ABOVE.
Here are some of the actual case file details. Perhaps Pro Se arguments can be augmented by reading this in its entirety.
http://brunettelawoffice.com/blog/wp-content/uploads/2009/09/bellistri-v-ocwen-loan-servicing-llc-284-sw3d-619-mo-app-2009.pdf
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Bellistri v. Ocwen Loan Servicing, LLC, 284 S.W.3d 619 (Mo. App., 2009)
– 1 –
284 S.W.3d 619
Robert BELLISTRI, Respondents,
v.
OCWEN LOAN SERVICING, LLC, Appellant.
No. ED 91369.
Missouri Court of Appeals, Eastern District, Division Five.
March 3, 2009.
Motion for Rehearing and/or Transfer to Supreme Court Denied April 6, 2009.
Application for Transfer Denied June 30, 2009.
[284 S.W.3d 621]
Blake Hill, Jeffrey Weisman, Co-Counsel, St.
Louis, MO, for appellant.
Phillip Gebhardt, Desoto, MO, for respondent.
NANNETTE A. BAKER, Chief Judge.
Introduction
The appellant, Ocwen Loan Servicing, L.L.C.1,
(Ocwen) appeals from a judgment of the Circuit
Court of Jefferson County quieting title to real estate
commonly known as 1210 Airglades, Arnold,
Missouri, 63010 (the property) in favor of Robert
Bellistri. Both parties filed motions for summary
judgment, and the circuit court held that Ocwen
lacked standing to contest Bellistri’s deed. For the
following reasons, we affirm.
Facts
On March 5, 2002, Glen Crouther purchased the
property and executed a promissory note and a deed
of trust. BNC Mortgage Inc. (BNC) was the lender
and payee of the promissory note. In the deed of
trust, Millsap, Singer & Dunn, P.C. was the trustee.
The deed of trust, however, did not name BNC as the
beneficiary, but instead names Mortgage Electronic
Registration System (MERS), solely as BNC’s
nominee. The promissory note does not make any
reference to MERS. The note and the deed of trust
both require payments to be made to the lender, not
MERS.
During 2002, 2003 and 2004, Crouther failed to
pay taxes. At the second offering delinquent tax sale,
Bellistri, the respondent, purchased the property and
was issued a certificate of purchase on August 22,
2005. On May 12, 2006, Bellistri sent BNC a notice
of redemption as required under the Jones Munger
Act, Section 140.405 RSMo. (2006).
On September 19, 2006, the collector of revenue
of Jefferson County, Missouri issued Bellistri a
collector’s deed. After the issuance of the collector’s
deed, MERS, as nominee for BNC, assigned the deed
of trust to Ocwen on April 4, 2007. The assignment
of the deed of trust also contained language that this
assignment also transferred any and all notes
described in the deed of trust.
Bellistri filed the instant action seeking to quiet
title and eject Crouther from the property. Initially,
Bellistri named Crouther as a defendant and
published notice for all other unknown persons with
an interest in the property. Later, Bellistri filed a
motion to add Ocwen as a necessary, if not
indispensable party. The circuit court granted his
motion. Ocwen and Bellistri filed cross motions for
summary judgment. The circuit court denied Ocwen’s
motion and granted summary judgment in favor of
Bellistri. Ocwen now appeals.
Standard of Review
Whether a motion for summary judgment should
be granted is a question of law and our review is
essentially de
[284 S.W.3d 622]
novo. ITT Commercial Finance Corp. v. Mid-
America Marine Supply Corp., 854 S.W.2d 371, 376
(Mo. banc 1993). Summary judgment is proper where
the movant establishes the absence of any genuine
issue of material fact and a legal right to judgment.
Id. at 378. We will review the record in the light most
favorable to the party against whom judgment has
been entered. Facts set forth by affidavit or otherwise
in support are taken as true unless contradicted by the
non-moving party’s response. Id. at 376. We will
affirm the trial court’s judgment if it is sustainable on
any theory. Citibrook II, L.L.C. v. Morgan’s Foods of
Missouri, Inc., 239 S.W.3d 631 (Mo.App. E.D.2007).
Points on Appeal
On appeal, Ocwen argues that the trial court
erred in entering summary judgment in favor of
Bellistri because (1) Bellistri lost his interest in the
property by failing to send MERS any notice
pursuant to section 140.405; (2) the notice Bellistri
sent to BNC misrepresented the redemption period
and was therefore insufficient; (3) summary
judgment should have been entered in its favor
because Bellistri failed to comply with section
140.405; and (4) Ocwen had standing in this quiet
title action because it was the named grantee on the
assignment of the deed of trust.
Discussion
We will address the issue of standing first, as it
is a jurisdictional matter antecedent to the right to
relief. Farmer v. Kinder, 89 S.W.3d 447, 451 (Mo.
banc 2002). Standing refers to a party’s right to seek
relief. Id. It “requires that a party seeking relief have
Bellistri v. Ocwen Loan Servicing, LLC, 284 S.W.3d 619 (Mo. App., 2009)
– 2 –
a legally cognizable interest in the subject matter and
that he has a threatened or actual injury.” Eastern
Missouri Laborers Dist. Council v. St. Louis County,
781 S.W.2d 43, 46 (Mo. banc 1989). Standing
requires the party to be sufficiently affected so as to
ensure a justiciable controversy. Shannon v. Hines,
21 S.W.3d 839, 841 (Mo.App. E.D.1999). Therefore,
a party “must have some actual, justiciable interest.”
Id. They must have a recognizable stake. Wahl v.
Braun, 980 S.W.2d 322 (Mo.App. E.D.1998). Lack
of standing cannot be waived and may be considered
by the court sua sponte. Brock v. City of St. Louis,
724 S.W.2d 721 (Mo.App. E.D.1987). If a party
seeking relief lacks standing, the trial court does not
have jurisdiction to grant the requested relief.
Shannon, 21 S.W.3d at 842.
The Jones Munger Act, RSMo section 140.330,
provides that one who acquires a collector’s deed may
bring an action to quiet title, naming as defendants
“all parties who have, or claim to have, or appear of
record in the county where such land or lot is
situated, to have an interest in, or lien upon such
lands or lots.” Section 140.330. Here, Ocwen appears
of record to have an interest in the property because it
is the named grantee on the assignment of the deed of
trust.
While this section allows broad joinder of
defendants, a named defendant will not prevail unless
the defendant has at least some interest in the
property. Scott v. Unknown Heirs of Solomon
Garrison, 361 Mo. 643, 235 S.W.2d 372, 374 (1951).
In Scott, the plaintiff claimed title by virtue of a tax
deed. The plaintiff brought an action to quiet her title,
and the defendant claimed he was the owner of the
property. The defendant, however, failed to produce a
recorded title. The defendant also never had
possession and paid no taxes on the property. He
claimed he lost the deed, but had assumed a contract
to purchase the property. The trial court found that
the defendant had no right, title or interest to the
property. On appeal, the defendant
[284 S.W.3d 623]
argued that the tax deed was void because the tax sale
was so grossly inadequate as to amount to fraud.
While the court agreed that the amount paid was so
grossly inadequate as to be constructive fraud, they
found that the defendant “did not have such an
interest or claim of right to the property in question to
challenge the sufficiency of the plaintiff’s deed.” Id.
Essentially, the Scott court found that the
defendant lacked standing to invalidate the tax deed.
The defendant lacked a legally cognizable interest in
the property, and therefore he could not challenge the
issuance of a collector’s deed.
The same is true in the instant case. While
Ocwen is the recorded grantee on the assignment of
the deed of trust, it has no legally cognizable interest.
Lacking such an interest, Ocwen is not entitled to the
relief it seeks, namely, to dismiss Bellistri’s petition
and declare that the plaintiff has lost all interest in the
real estate. Essentially, Ocwen is asking the court to
quiet title in Crouther’s name.
To seek this relief from the court, Ocwen must
at least have an “interest” in the property. Scott, 235
S.W.2d at 374; Thurmon v. Ludy, 914 S.W.2d 32, 34
(Mo. App. E.D.1995) On the assignment of the deed
of trust, Ocwen is listed as the grantee, as servicer for
Deutsche Bank National Trust Company, as Trustee
for the registered holders of the CDC Mortgage
Capital trust, 2002-HE1, Mortgage Pass-Through
Certificates, Series 2002-HE1 (Deutsche Bank). We
must turn to the law of mortgages to understand
Ocwen’s interest.
Generally, a mortgage loan consists of a
promissory note and security instrument, usually a
mortgage or a deed of trust, which secures payment
on the note by giving the lender the ability to
foreclose on the property. Typically, the same person
holds both the note and the deed of trust. In the event
that the note and the deed of trust are split, the note,
as a practical matter becomes unsecured. Restatement
(Third) of Property (Mortgages) § 5.4. Comment.
The practical effect of splitting the deed of trust 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.
Id. 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. Id. The mortgage loan
became ineffectual when the note holder did not also
hold the deed of trust.
When the holder of the promissory note assigns
or transfers the note, the deed of trust is also
transferred. George v. Surkamp, 336 Mo. 1, 76
S.W.2d 368, 371 (1934). An assignment of the deed
of trust separate from the note has no “force.” Id.
Effectively, the note and the deed of trust are
inseparable, and when the promissory note is
transferred, it vests in the transferee “all the interest,
rights, powers and security conferred by the deed of
trust upon the beneficiary therein and the payee in the
notes.” St. Louis Mut. Life Ins. Co. v. Walter, 329
Mo. 715, 46 S.W.2d 166, 170 (1931).
When it assigned the deed of trust, MERS
attempted to transfer to Ocwen the deed of trust
“together with any and all notes and obligations
therein described or referred to, the debt respectively
secured thereby and all sums of money due and to
become due.” The record reflects that BNC was the
Bellistri v. Ocwen Loan Servicing, LLC, 284 S.W.3d 619 (Mo. App., 2009)
– 3 –
holder of the promissory note. There is no evidence
in the record or the pleadings that MERS held the
promissory note or that BNC
[284 S.W.3d 624]
gave MERS the authority to transfer the promissory
note. MERS could not transfer the promissory note;
therefore the language in the assignment of the deed
of trust purporting to transfer the promissory note is
ineffective. Black v. Adrian, 80 S.W.3d 909, 914-15
(Mo.App. S.D.2002) (“[A]ssignee of a deed of trust
or a promissory note is vested with all interests,
rights and powers possessed by the assignor in the
mortgaged property”). MERS never held the
promissory note, thus its assignment of the deed of
trust to Ocwen separate from the note had no force.
See George, 76 S.W.2d at 371. St. Louis Mut. Life
Ins. Co., 46 S.W.2d at 170.
As Ocwen holds neither the promissory note,
nor the deed of trust, Ocwen lacks a legally
cognizable interest and lacks standing to seek relief
from the trial court. See Scott, 235 S.W.2d at 374.
The trial court was without jurisdiction to grant
Ocwen its requested relief, and did not err in granting
summary judgment in Bellistri’s favor.
Conclusion
Ocwen lacked a legally cognizable interest in
the property, and therefore, it has no standing to seek
relief. We hereby affirm the judgment of the circuit
court of Jefferson County.
GLENN A. NORTON, J., and KENNETH M.
ROMINES, J., concur.
—————
Notes:
1. Ocwen Loan Servicing, L.L.C. refers to Ocwen
Loan Servicing, L.L.C., servicer for Deutsche Bank
National Trust Company, as Trustee for the
registered holders of the CDC Mortgage Capital trust
2002-HE1, as successor
John.
You said………….
“john, on October 9th, 2009 at 6:36 pm Said:
Well, I have 2 properties in Florida that appear to be connected to MERS (e.g. Kansas Supreme Court decision around September 21, 2009). I am not in foreclosure on either property (however they have lost at least 50%). ………………..what should be the steps to take (I literally do not know how to proceed)? ”
Start here, read this site, unbelievable info here. Conserve your money for finding a GOOD ATTORNEY. Research “APRIL CHARNEY” she’s helping Florida…… I wish she were in my state.
MOVE FORWARD
[…] may have given millions of distressed homeowners the legal wedge they need to avoid foreclosure. In Landmark National Bank v. Kesler, 2009 Kan. LEXIS 834, the Kansas Supreme Court held that a nominee company called MERS has no right […]
Well, I have 2 properties in Florida that appear to be connected to MERS (e.g. Kansas Supreme Court decision around September 21, 2009). I am not in foreclosure on either property (however they have lost at least 50%). One of these property is a rental (am paying out of pocket to cover mortgage for over 2 years). Although we do not want to go through foreclosure, my wife and I are ready to go into foreclosure if it is necessary (eventually we will have to since we cannot continue to borrow from credit to pay the shortfall). Do we have a chance to push the MERS descision or what should be the steps to take (I literally do not know how to proceed)?
I am a paralegal that has been researching lender liability for some time now and this website is a great resource of knowledge for those who wish to see the banking system in this country put in its rightful place! I personally see many homeowners suing to foreclose on their lenders in the future for either predatory lending or truth-in-lending violations. Because most lenders who are foreclosing are NOT the parties of interest, when homeowners finally wake up and realize this, the banks will be in sorry shape … deservedly so.
This was on MERS site, I was trying to find the message they sent me. still looking.
Is it ok to copy an email, they say no?
Frequently Asked Questions on the
Kansas Supreme Court Decision
Q: Can you sum up the decision?
A: On August 28, 2009, the Kansas Supreme Court issued a decision in the case of Landmark National Bank v. Boyd A. Kesler. Our involvement with this case stemmed from the fact that we did not receive notice of the lawsuit which we were entitled to receive. The Kansas Supreme Court, who did not want to reopen a case that had already been decided by a lower court, went out of its way to write a narrow opinion that had more to do with finality of judgments than it did with MERS. This case was not a MERS foreclosure nor was it about our standing to foreclose.
Q: What does the ruling mean?
A: MERS can continue to foreclose and is entitled to receive notice when MERS is the mortgagee because the Court did not say otherwise. In fact, the Court went out of its way to emphasize the narrow scope of its ruling by stating: “Even if MERS was technically entitled to notice and service in the initial foreclosure action—an issue that we do not decide at this time…” Moreover, foreclosures can continue to be prosecuted in the name of MERS because the Court made no mention of this issue.
Q: How will the ruling affect the operations of your members?
A: The decision is actually quite limited in its scope and as such should have little effect on the day-to-day operations of MERS members. However, we do believe that the ruling is confusing and goes against longstanding precedent. This is not the end of the judicial process.
**UPDATE**
The Kansas Supreme Court’s ruling against the MERS concept is obviously problematic for mortgages in Kansas, where the mortgagee or assignee is named as “MERS as nominee for the lender.” A motion for “rehearing/modification” was filed on September 17, 2009, and remains pending.
I am not a lawyer and this is not legal advice, but in California, you can file a simple one-page “Request for Judicial Review” in Superior Court to initiate the process to force your lender and MERS to validate they have standing to foreclose. Then you can file documents to notify all intersted parties that the title is under review which should deter most, if not all, potential buyers.
Once you get all the arguments out on the table, you remove the case to Federal Court to discuss the TILA, RESPA, etc. requirements.
Interesting. I have a hearing 10/22. BAC is trying to foreclose.
How can I convince the judge to dismiss? Any suggestions?
[…] Strategic Implications of the Landmark (Kesler) Kansas Supreme Court Decision Posted on September 29, 2009 by livinglies See entire decision here > kansas-supreme-court-sets-precedent-key-decision-confirming-livinglies-strategies […]
[…] WITH the mortgage bust approaching Year Three, it is increasingly up to the nation’s courts to examine the dubious practices that guided the mania. A ruling that the Kansas Supreme Court issued last month has done precisely that, and it has significant implications for both the mortgage industry and troubled borrowers. Editor’s Note: See kansas-supreme-court-sets-precedent-key-decision-confirming-livinglies-strategies […]
Check out loansafe.org. Helping Americans with Loan Modifications
[…] Breaking the Bank News: Millions of Fraudulent Mortgages Kansas Supreme Court Sets Precedent – Key Decision Confirming Livinglies’ Strategies Liv… This might explain the implications of the Kansas MERS […]
[…] Kansas Supreme Court Sets Precedent – Key Decision Confirming Livinglies’ Strategie… […]
[…] 24, 2009 by Taunter The Kansas Supreme Court has given, if not the green light, at least a very long yellow to people who want to try to drag out […]
Very nice article. Well written and understandable.
A question: MERS uses different forcloseure procedured for each state, see KS vs CA rules at http://www.mersinc.org/foreclosures/details.aspx?state=CA (then chg CA to KS to compare). There are various approaches, but I think CA uses a note and deed of trust , as opposed to a mortgage.
Does the reasoning of Landmark seem applicable or inapplicable to CA homeowners where MERS is involved.
Livinglies–Thanks for all your work on this. Since most forms of debt are bundled and securitized, doesn’t this decision effect them too?
[…] may have given millions of distressed homeowners the legal wedge they need to avoid foreclosure. In Landmark National Bank v. Kesler, 2009 Kan. LEXIS 834, the Kansas Supreme Court held that a nominee company called MERS has no right […]
[…] may have given millions of distressed homeowners the legal wedge they need to avoid foreclosure. In Landmark National Bank v. Kesler, 2009 Kan. LEXIS 834, the Kansas Supreme Court held that a nominee company called MERS has no right […]
Question for any and all.
Judicial State Foreclosure
If a mortgage goes in default, the servicer contacts the foreclosure mill lawyers. The lawyers contact Mers and than assign the mortgage only, to xyz bank trustee for xyz.. If Mers cannot foreclose in its own right is the assignment valid or not.
If the assignmnet is not valid does it go back to Mers? If it goes back to Mers what are the consequences?
Thank You
Hello livinglies,
If there’s no clear title, then there’s no sales & real estate is dead in its tracks, or will be if anyone notices these cases working through the various state courts.
Which means state legislatures need to pass some sort of law, but what, exactly? If they declare MERS to be the lawful holder – even though they cannot show title – then they destroy contract law, and no court will let them do that. If the various states do nothing, then no one can buy & no one can sell because there’s no clear titles to transfer. Which is impossible. Or, based on court rulings, they declare MERS forfeit, title reverts back to the occupier (who else?), in which case owners get a permanent mortgage holiday, investors are wiped out, and property values fall by half, or more, overnight.
Here’s my example: We bought in December 2005 at $359,000. Flipping previous property, plus a bit of inheritance, gave us a down payment of $140,000, giving a mortgage of $219,000, which is now at $210,000. With the mortgage, but ignoring interest & improvements, if I was to sell, I would need at least $349,000 to break even. If the mortgage went “poof!” I can sell for $200,000 & make money. Me & every other man jack in the country.
Until this is cleared up, one way or another, who would buy a property where MERS holds the title? Thank-you, Kansas!
Dave of Maryland: That’s the point — nobody is buying or getting anything under standard laws and rules governing title transfer. The best anyone can claim is colorable title that is susceptible to challenge far down the road. So title is either clouded, defective or both. What are you getting? Nothing.
Correct me if I’m wrong, but if the mortgage holder cannot sue to reposes, then can said mortgage holder deliver a valid title upon eventual sale of property?
If I’m a buyer & MERS is the mortgage holder, what, exactly, am I buying?
[…] may have given millions of distressed homeowners the legal wedge they need to avoid foreclosure. In Landmark National Bank v. Kesler, 2009 Kan. LEXIS 834, the Kansas Supreme Court held that a nominee company called MERS has no right […]
The question here was MERS’ independent right to notice, which the court rightly ruled it did not have. And the holder in due course of the note had already been ruled to have forfeited its independent right to notice by not recording its interest in the mortgage. Nothing in the decision seems to interfere with MERS’ ability to foreclose as a nominee of the mortgagee provided the MERS’ membership documents nominate it to that function and provided that the entity for which it is the nominee is in fact the current mortgagee. If Sovereign was damaged because it failed to avail itself of the opportunity provided for by law to procure notice of legal action (recording) or by contract in the chain of ownership… well, tough. But the idea that MERS’ is incurably prevented from engaging in foreclosure or that its prior foreclosures will be invalidated is fantasy.
[…] may have given millions of distressed homeowners the legal wedge they need to avoid foreclosure. In Landmark National Bank v. Kesler, 2009 Kan. LEXIS 834, the Kansas Supreme Court held that a nominee company called MERS has no right […]
[…] affair. For the first day of autumn, things are running hot! In Landmark National Bank v. Kesler (full ruling), 2009 Kan. LEXIS 834, the Kansas Supreme Court held that a nominee company called MERS has no […]
[…] Neil Garfield on the Kansas Supreme Court Decision that blocks many foreclosures in the state of Kansas and sets precedent for the rest of the country: This is one state, but it is likely to serve as the basis for most appellate opinions rendered on securitized loans. The tide has turned. The moral of the story is that those encumbrances (mortgages) don’t exist in most cases, the foreclosures were all fatally flawed, the people who have been chased out of their homes, still own those homes, and the parties seeking to enforce the note can do so only as unsecured creditors and only if they prove that they lent the money that funded the loan and only if they are willing to be subject to counterclaims, cross claims, affirmative defenses and defenses of the borrower relating to predatory lending, appraisal fraud, securities fraud, rescission under all available theories of law, damages, treble damages, punitive damages, exemplary damages and consequential economic damages.Neil Garfield Attorney and Homeowner Advocate […]
[…] Over at PW, JHoward gleefully recapitulates a Helen Brown article in Global Research about a Kansas court case that has far-reaching potential to severely damage the housing finance market, and thus the whole […]
[…] may have given millions of distressed homeowners the legal wedge they need to avoid foreclosure. In Landmark National Bank v. Kesler, 2009 Kan. LEXIS 834, the Kansas Supreme Court held that a nominee company called MERS has no right […]
[…] may have given millions of distressed homeowners the legal wedge they need to avoid foreclosure. In Landmark National Bank v. Kesler, 2009 Kan. LEXIS 834, the Kansas Supreme Court held that a nominee company called MERS has no right […]
I just posted this to my Blog so that 40,000 readers will get the good news fast.
Thank for the info!
[…] may have given millions of distressed homeowners the legal wedge they need to avoid foreclosure. In Landmark National Bank v. Kesler, 2009 Kan. LEXIS 834, the Kansas Supreme Court held that a nominee company called MERS has no right […]
[…] may have given millions of distressed homeowners the legal wedge they need to avoid foreclosure. In Landmark National Bank v. Kesler, 2009 Kan. LEXIS 834, the Kansas Supreme Court held that a nominee company called MERS has no right […]
[…] _Kansas Supreme Court Sets Precedent – Key Decision Confirming Livinglies’ Stra_ (http://livinglies.wordpress.com/2009/09/16/kansas-supreme-court-sets-precedent-key-decision-confirmi…) […]
[…] may have given millions of distressed homeowners the legal wedge they need to avoid foreclosure. In Landmark National Bank v. Kesler, 2009 Kan. LEXIS 834, the Kansas Supreme Court held that a nominee company called MERS has no right […]
MN Forclosure Rate stems from Courts Complicity
Please vist also http://www.sharonanderson.org
City and County are Fees/Assessments/ROW
Right of Way based on Theft,Trespass,Treason, Stealing Cars from Private Property, then At War with State Homestead Laws
http://www.mncourts.gov re: File 62cv09-1163 currently on Appeal
[…] may have given millions of distressed homeowners the legal wedge they need to avoid foreclosure. In Landmark National Bank v. Kesler, 2009 Kan. LEXIS 834, the Kansas Supreme Court held that a nominee company called MERS has no right […]
42 U.S.C.
§1981(a)
“All persons within the jurisdiction of the United States shall have the same right in every State and Territory to make and enforce contracts, to sue, be parties, give evidence, and to the full and equal benefit of all laws and proceedings for the security of persons and property”
§1981(b)
“For purposes of this section, the term “make and enforce contracts” includes the making, performance, modification, and termination of contracts, and the enjoyment of all benefits, privileges, terms, and conditions of the contractual relationship,”
§1981(c)
“The rights protected by this section are protected against impairment by nongovernmental discrimination and impairment under color of State law.”
Sounds like equal protection and due process to me.
Dan Edstrom
dmedstrom@hotmail.com
I concur totally about MERS. Yes, they do admit that basically, there nothing but a “front company” for the bankerrorists.
Hopefully more judges will begin to realize, as Neil pointed out, that none of this is that complicated (it only appears to be) and is quite illegal under existing laws.
Kansas Court site reports something different that you do.
http://www.kscourts.org/Cases-and-Opinions/opinions/ctapp/2008/20080912/98489.htm
No. 98,489
IN THE COURT OF APPEALS OF THE STATE OF KANSAS
LANDMARK NATIONAL BANK,
Plaintiff/Appellee,
v.
BOYD A. KESLER,
Appellee/Cross-Appellant,
MILLENNIA MORTGAGE CORP.,
Defendant,
MORTGAGE ELECTRONIC REGISTRATION
SYSTEMS, INC. AND SOVEREIGN BANK,
Appellants/Cross-Appellees,
and
DENNIS BRISTOW AND TONY WOYDZIAK,
Intervenors/Appellees.
SYLLABUS BY THE COURT
1. A party is not contingently necessary in a mortgage-foreclosure lawsuit when that party is called the mortgagee in a mortgage but is not the lender, has no right to the repayment of the underlying debt, and has no role in handling mortgage payments.
2. In a mortgage-foreclosure lawsuit, a district court does not abuse its discretion when it denies a motion to intervene that is filed by an unrecorded mortgage holder or its agent after the mortgage has been foreclosed and the property has been sold.
Appeal from Ford District Court; E. LEIGH HOOD, judge. Opinion filed September 12, 2008. Affirmed.
Tyson C. Langhofer and Court T. Kennedy, of Stinson Morrison Hecker, L.L.P., of Wichita, for appellants/cross-appellees.
Ted E. Knopp, of Ted E. Knopp, Chartered, of Wichita, for appellee/cross-appellant Boyd A. Kesler.
Ted E. Knopp, of Ted E. Knopp, Chartered, of Wichita, for intervenors/appellees Dennis Bristow and Tony Woydziak.
Before GREENE, P.J., MARQUARDT and LEBEN, JJ.
LEBEN, J.: Landmark National Bank brought a suit to foreclose its mortgage against Boyd Kesler and joined Millennia Mortgage Corp. as a defendant because a second mortgage had been filed of record for a loan between Kesler and Millennia. In a foreclosure suit, it is normal practice to name as defendants all parties who may claim a lien against the property. When neither Kesler nor Millennia responded to the suit, the district court gave Landmark a default judgment, entered a journal entry foreclosing Landmark’s mortgage, and ordered the property sold so that sale proceeds could be applied to pay Landmark’s mortgage.
But Millennia apparently had sold its mortgage to another party and no longer had interest in the property by this time. Sovereign Bank filed a motion to set aside the judgment and asserted that it now held the title to Kesler’s obligation to pay the debt to Millennia. And another party, Mortgage Electronic Registration Systems, Inc. (“MERS”), also filed a motion to set aside the judgment and asserted that it held legal title to the mortgage, originally on behalf of Millennia and later on behalf of Sovereign. Both Sovereign and MERS claim that MERS was a necessary party to the foreclosure lawsuit and that the judgment must be set aside because MERS wasn’t included on the foreclosure suit as a defendant.
The district court refused to set aside its judgment. The court found that MERS was not a necessary party and that Sovereign had not sufficiently demonstrated its interest in the property to justify setting aside the foreclosure.
I. The District Court Properly Refused to Set Aside the Foreclosure Judgment Because MERS Was Not a Necessary Party.
To resolve these claims, we will review some basic concepts of mortgages and foreclosure proceedings. We must pay close attention not only to the terms given to the parties in carefully crafted documents but also to the roles each party actually performed. No matter the nomenclature, the true role of a party shapes the application of legal principles in this case.
A mortgage grants a title or lien against a property as security for the payment of a debt or the performance of a duty. The “mortgagor” is the borrower who grants a mortgage in exchange for a loan; the “mortgagee” is the lender who gives the loan secured by the mortgage. See Black’s Law Dictionary 1031, 1034 (8th ed. 2004). The mortgagee is so well understood as the lender that Black’s Law Dictionary defines a “foreclosure” as an action brought by the lender/mortgagee: a foreclosure is a “legal proceeding to terminate a mortgagor’s interest in property, instituted by the lender (the mortgagee) either to gain title or to force a sale in order to satisfy the unpaid debt secured by the property.” Black’s Law Dictionary 674. Similarly, the tie between a mortgage and an underlying debt is so intrinsic that Kansas law provides that “[t]he assignment of any mortgage . . . shall carry with it the debt thereby secured.” K.S.A. 58-2323. Indeed, an assignment of a mortgage without the debt transfers nothing. 55 Am. Jur. 2d, Mortgages § 1002. Thus, the mortgagee, who must have an interest in the debt, is the lender in a typical home mortgage.
But for reasons thought beneficial by a group of lenders who trade mortgages, the form of mortgage used in this case designates an entity that is not the lender as the mortgagee. See MERSCORP, Inc. v. Romaine, 8 N.Y.3d 90, 96, 828 N.Y.S.2d 266, 861 N.E.2d 81 (2006) (MERS was established by large lenders to allow easy electronic trading and tracking of mortgages). Specifically, the mortgage says that the mortgagee is MERS, though “solely as nominee for Lender.” Does this mean that MERS really was the mortgagee, even though it didn’t lend money or have any rights to loan repayments? Assuming so, MERS argues that it was a necessary party to the foreclosure and that the foreclosure must be set aside. But the premise upon which MERS bases this argument is flawed.
What is MERS’s interest? MERS claims that it holds the title to the second mortgage, not the real estate. So it does, but only as a nominee. In terms of the roles that we’ve discussed in the mortgage business, MERS holds the mortgage but without rights to the debt. The district court found that MERS was merely an agent for the principal player, Millennia. While MERS objects to its characterization as an agent, it’s a fair one.
MERS had no right to the underlying debt repayment secured by the mortgage; MERS did not even act as the servicing agent to receive the payments and remit them to the lender. MERS’s right to act to enforce the mortgage was strictly limited: if “necessary to comply with law or custom,” MERS could foreclose the mortgage or enter a release of the mortgage. MERS certainly could not act at odds to its principal, the lender. Its role fits the classic definition of an agent: one “‘authorized by another to act for him, or intrusted with another’s business.'” In re Tax Appeal of Scholastic Book Clubs, Inc., 260 Kan. 528, 534, 920 P.2d 947 (1996) (quoting Black’s Law Dictionary 85 [4th ed. 1968]).
Only one Kansas case has discussed the meaning of nominee in any detail. In Thompson v. Meyers, 211 Kan. 26, 30, 505 P.2d 680 (1973), the court noted that the meaning of the term may vary from a pure straw man or limited agent to one who has broader authority.
But whatever authority the nominee may have comes from the delegation of that authority by the principal. In its ordinary meaning, a nominee represents the principal in only a “nominal capacity” and does not receive any property or ownership rights of the person represented. See, e.g., Cisco v. Van Lew, 60 Cal. App. 2d 575, 583-84, 141 P.2d 433 (1943); see also Applebaum v. Avaya, Inc., 812 A.2d 880, 889 (Del. 2002) (referring to nominees “as agents of the beneficial owners”). The Millennia mortgage does not purport to give MERS any greater rights than normally given a nominee. The mortgage says that MERS acts “solely as nominee for Lender.” There is no express grant of any right to MERS to transfer or sell the mortgage or even to assign its duties as nominee. Nor does MERS obtain any right to the borrower’s payments or even a role in receiving payments.
MERS and Sovereign correctly note that a foreclosure judgment may be set aside for failure to join a contingently necessary party. E.g., Wisconsin Finance v. Garlock, 140 Wis. 2d 506, 512, 410 N.W.2d 649 (1987). For the purposes of our case, a party is contingently necessary under K.S.A. 60-219 if the party claims an interest in the property at issue and the party is so situated that resolution of the lawsuit without that party may “as a practical matter substantially impair or impede [its] ability to protect that interest.” The real issue is that of the lender, the true mortgagee, to protect its security interest against the property. Whether MERS may act as a nominee for the lender, either to bring a foreclosure suit or for some other purpose, is not at issue in Landmark’s foreclosure lawsuit. Moreover, an agent for a disclosed principal is not a necessary party to a lawsuit adjudicating the substantive rights of the principal. Hotel Constructors, Inc. v. Seagrave Corp., 99 F.R.D. 591, 592 (S.D.N.Y. 1983); Liles v. Winters Independent School District, 326 S.W.2d 182, 188 (Tex. App. 1959).
In support of the necessary-party argument, MERS and Sovereign cite Dugan v. First Nat’l Bank in Wichita, 227 Kan. 201, 606 P.2d 1009 (1980). In Dugan, a bank agreed to act as escrow agent for three parties who loaned money and obtained a mortgage as collateral. The bank was to receive all repayments made on the various loans and then remit them to the lenders in the appropriate percentages; the bank was also the named mortgagee, apparently due to the multiple lenders who were separate actors. The court held that the bank and the lenders were all necessary parties to the lawsuit, in which the borrower sought reformation or cancellation of the mortgages based on fraud and breach-of-fiduciary-duty claims. The bank was a necessary party even though it had no direct financial interest in the loans and would “be affected only tangentially in its position as designated mortgagee and escrow agent.” 227 Kan. at 212.
In response, Kesler cites Moore v. Petroleum Building, Inc. 164 Kan. 102, 187 P.2d 371 (1947). In Moore, a plaintiff had intervened in a past foreclosure action and later filed suit to enjoin a bank and escrow holder from delivering deeds to another party. The bank was used only to hold deeds that would be delivered upon termination of the leases and was not a party to the original foreclosure. The court held that the plaintiff should have raised issues regarding his rights under the escrow agreement in the previous foreclosure case, noting that “there probably was no necessity that [the bank] should have been made a party, for it stood by only as a custodian of the deeds and for no other purpose.” 164 Kan. at 108.
We find Moore closer to our facts than Dugan. Like the bank in Moore, MERS did not receive any funds on behalf of Millennia or Sovereign. The mortgage set out clearly that the borrower, Kesler, was to pay his monthly payments to the lender. The mortgage also suggests that the reputed mortgagee, MERS, was not interested in receiving notices of default. The Millennia mortgage, which was duly recorded in the public record, included a section titled “Request For Notice of Default and Foreclosure Under Superior Mortgages or Deeds of Trust.” As the district court noted, that section provided that both “Borrower and Lender request” the holder of any mortgage with priority “give Notice to Lender, at Lender’s address set forth on page one of this Mortgage, of any default . . . and of any sale or other foreclosure action.” Millennia’s address was noted on page one of the mortgage; the mortgage did not list MERS as an entity to contact upon default or foreclosure.
Two older Kansas cases should also be noted, though the parties didn’t cite them. In Swenney v. Hill, 65 Kan. 826, 70 P. 868 (1902), the court faced a situation somewhat different than today’s typical residential-mortgage. As part of the same transaction, a couple borrowed money and then gave mortgage bonds to two individuals and a mortgage to an investment company. Repayment of the loan was made to the bondholders, but the mortgagee/investment company had “extensive rights and active powers over the relationship” between the borrowers and the bondholders. 65 Kan. at 828. While the court did not concern itself with why this structure had been chosen, it determined that the mortgagee/investment company was a necessary party because it had a right under the written agreements to advance additional funds, thus increasing the amount of the lien, as well as the right to declare the loan matured and bring suit. In addition, the mortgage could not be released by the bondholders alone; the mortgagee/investment company was also required to approve it. We do not know from the court’s opinion whether the investment company organized the transaction initially or made any guarantee of repayment to the bondholders, but the court said that the investment company had “substantial rights and interests.” 65 Kan. at 829.
A second relevant case is Gibson v. Ledwitch, 84 Kan. 505, 114 P. 851 (1911). It involved the converse of our case–a party sued to quiet title against a mortgage, which would clear the title from the encumbrance of that mortgage. But the plaintiff joined only a trustee who had no beneficial interest in that mortgage; the beneficial owner was not made a party. The court held that the judgment did not bind the beneficial holder of the mortgage since the trustee had no right to the payments, was not the party to declare default, and had no authority to transfer or foreclose the mortgage.
We also believe that the decisions in Swenney and Gibson are supportive of the result here. MERS does not have the sort of “substantial rights and interests” that the investment company had in Swenney. MERS points to its ability to foreclose or to release the mortgage, authority provided in the mortgage “if necessary to comply with law or custom.” Kansas law does require through K.S.A. 58-2309a that a mortgage holder promptly release a mortgage when the debt has been paid; MERS could be required as a matter of law to file a mortgage release after a borrower proved that the debt had been paid. Other than that, however, it is hard to conceive of another act that MERS–instead of the lender–would be required to take by law or custom. And although Gibson involves the converse of our case, it suggests that a party with no beneficial interest is outside the realm of necessary parties.
In addition to the claim that MERS was a necessary party under K.S.A. 60-219, MERS and Sovereign also argue that the failure to include MERS violated its due process rights. But MERS had no direct property interests at stake; even its right to act on behalf of its principal was not at issue in Landmark’s suit. Without a property interest at stake, there can be no due process violation. State ex rel. Tomasic v. Unified Gov’t of Wyandotte County/Kansas City, 265 Kan. 779, 809, 962 P.2d 543 (1998).
We do not attempt in this opinion to comprehensively determine all of the rights or duties of MERS as a nominee mortgagee. As the mortgage suggests may be done when “necessary to comply with law or custom,” courts elsewhere have found that MERS may in some cases bring foreclosure suits in its own name. Mortgage Electronic Registration v. Azize, 965 So. 2d 151 (Fla. Dist. App. 2007). On the other hand, some have suggested potential problems created by MERS’s practices, MERSCORP, Inc. v. Romaine, 8 N.Y.3d 90, 100-04, 828 N.Y.S.2d 266, 861 N.E.2d 81 (2006) (Kaye, C.J., dissenting), or with the handling of paperwork documenting who owns what in the residential-mortgage industry in general. E.g., In re Nosek, 386 B.R. 374, 385 (Bankr. D. Mass. 2008); In re Foreclosure Cases, 2007 WL 3232430 (N.D. Ohio 2007) (unpublished opinion). In this case, we are only required to address whether the failure to name and serve MERS as a defendant in a foreclosure action in which the lender of record has been served is such a fatal defect that the foreclosure judgment must be set aside. We hold that it is not.
II. The District Court Did Not Abuse Its Discretion by Denying Motions of MERS and Sovereign to Intervene After the Judgment Had Been Entered.
Neither MERS nor Sovereign argue that Landmark was required to join Sovereign. But both MERS and Sovereign argue that the district court wrongly denied their motions to intervene.
On this argument they face a major hurdle: the Kansas Supreme Court has held that there is no jurisdiction even to consider a motion to intervene made after the entry of judgment and the expiration of the 10-day period for filing new-trial motions. Smith v. Russell, 274 Kan. 1076, Syl. 4, 58 P.3d 698 (2002). Even so, timeliness is to be determined from the specific circumstances of each case. See Mohr v. State Bank of Stanley, 244 Kan. 555, 562, 770 P.2d 466 (1989). Although some caselaw allows intervention after judgment “where it is necessary to preserve some right which cannot otherwise be protected,” these authorities generally have allowed intervention so that there would be appropriate representation in an appeal when a party that originally participated in the case is no longer adequately representing the intervenor’s interest. E.g., Hukle v. City of Kansas City, 212 Kan. 627, 631-32, 512 P.2d 457 (1973). Of course, that’s not our situation.
The intervention argument faces another hurdle too: the decision whether to permit intervention may be reversed only when no reasonable person could agree with the district court’s decision. See Mohr, 244 Kan. at 561-62; Farmers Group, Inc. v. Lee, 29 Kan. App. 2d 382, 385, 28 P.3d 413 (2001). Sovereign’s motion to intervene was filed 76 days after foreclosure, 53 days after the court ordered the property sold, and 26 days after the property was sold. MERS’s motion to intervene was filed 134 days after foreclosure, 111 days after the court ordered the property sold, and 84 days after the property was sold. Especially in light of Smith’s holding that a court lacked jurisdiction when the motion to intervene came after the 10-day period for filing new-trial motions, we believe it would be extremely difficult–even if the district court had jurisdiction to grant intervention–to reverse for an abuse of discretion on motions filed as far after judgment as those of Sovereign and MERS.
MERS and Sovereign argue that their intervention motions were timely because the time for filing an appeal had not yet run. They base this argument on a claim that the time to file an appeal doesn’t begin until the sheriff’s sale of the property is confirmed. But a judgment of foreclosure is a final judgment for appeal purposes when it determines the rights of the parties, the amounts to be paid, and the priority of claims. Stauth v. Brown, 241 Kan. 1, 6, 734 P.2d 1063 (1987). The foreclosure judgment in this case did so. We find no abuse of discretion in denying intervention.
III. Separate Claims by Kesler and Other Parties Are Not Properly Raised on Appeal.
Dennis Bristow and Tony Woydziak, who together bought the property at a sheriff’s sale, have sought to proceed with Kesler on a cross-appeal to challenge the district court’s orders enjoining them from finalizing sale of the property while the appeal was heard. They also seek a ruling that Sovereign is bound by the district court’s judgment.
Kesler, Bristow, and Woydziak raise issues that are not based on the same judgments on which MERS and Sovereign have filed their appeal. The joint notice of appeal from MERS and Sovereign noted an appeal from “(1) Journal Entry of Judgment filed September 6, 2006; (2) Order filed January 18, 2007; (3) Supplemental Order filed January 18, 2007; and (4) Order Denying Motions for Reconsideration filed March 22, 2007.” But Kesler, Bristow, and Woydziak attempted to include a separate district court decision, entered May 2, 2007, which had denied their motions to dismiss for lack of jurisdiction the motions to intervene by MERS and Sovereign and also granted a stay pending appeal to MERS and Sovereign. A cross-appeal must involve the same judgment as the underlying appeal, but Kesler, Bristow, and Woydziak argue a separate issue from a different district court order.
Even if the same judgment were involved, notice of a cross-appeal must be filed within 20 days of the notice of appeal. MERS and Sovereign filed their joint notice of appeal on March 28, 2007; Kesler, Bristow, and Woydziak did not seek to file a cross-appeal within 20 days of that date.
This court is without jurisdiction to address the separate issues raised on appeal by Kesler, Bristow, and Woydziak.
Conclusion
The district court properly determined that MERS was not a contingently necessary party in Landmark’s foreclosure action. The district court also was well within its discretion in denying motions from MERS and Sovereign to intervene after a foreclosure judgment had been entered and the foreclosed property had been sold. The judgment of the district court is affirmed.
END
zurenarrh,
Its ABSOLUTELY TRUE. Read the entire article and Neils comments and annotations. There is other case law also.
MERS paid no consideration and has testified under oath that they do NOT have any of the documents.
Thanks,
Dan Edstrom
dmedstrom@hotmail.com
Martin said:
” MERS held no title, issued no credit and acted in no lending capacity…thus rendering all subsequent assignments(fraudulent they were) VOID AB INITIO.”
Great point–I wonder if that argument will fly? It certainly ought to.
Jose’s post was awesome–we have to get out there and kick ass and take names. We have to let the banksters know that we aren’t their slaves. We have to quit trying to be “reasonable” with these people–that’s what they’re counting on.
There are still lawyers out there, who still after two years of total defeat in loan modifications are recommending that insane road to their clients, under the false belief that it is better for them to keep the peace with the other side and to make it financially rewarding for them, even though they know they are beating a dead horse.
Only less than 10% of all mortgages actually qualify for a “Loan Modification” and that is after the Tax payers put up an infamous amount of cash to prop up the pockets of the banksters.
Yes, I would agree that going the “fight for your rights” route is more time consuming, is full of anxiety, and god willing you hire a lawyer with real “BALLS”, you at the end will be better of.
The crime these banksters perpetrated against all of us is of unmeasurable proportions. Do not make it easy for them and the castrated lawyers out there win over you.
Do not believe in all the silly, the economy is recovering speech, things are really tough out there and you need to stick to your guns. At the end of this year more than two million families would have lost their homes due to this huge fraud.
All the “stuff” that Mr. Garfield and all his selfless collaborators put up here is more than golden, it has put the criminals and their cronies against the ropes, believe me, the criminal element in the banksters world and the foreclosure vulture lawyers establishment are spending billions of dollars trying to come up with a way to vanquish all of us and our hopes.
All I can say is that even though the battle is not even in nature, I do not have to pay anyone to share what I know, what I have learned and if by sharing the knowledge I have acquired by being relentless in pursuing this fight with others, then at least I may be helping some other totally frustrated soul out there to fight fort their family, hopes and dreams.
This is for all the lawyers out there, the people coming to your office asking for help and advice are doing so because everyone has betrayed them, they have been taken advantage of and they have faced an unfair world and a regulatory structure that benefited the banksters and even after all this mess nothing of substance has changed. You as an attorney and an officer of the court need to remember that these families seeking legal refuge in your office need some one they can trust, some one they will have on their side.
Your ability to understand their situation and to work a proper deal with them may save their last hope in humanity. Greed is a bad element in anyone’s character and will give you bad advice. We have seen so many lawyers that got into the loan modification scam for all the wrong reasons crash and burn.
Keep yourself honest and keep your client informed. Be organized, handle the money properly, and do not be afraid to fight, your clients will be happier at the end regardless of the outcome once they have seen you fight the good fight. You must be relentless and please attend Mr. Garfields’ seminar, you will not regret it. If you consider yourself a decent lawyer you should educate yourself and do not take the other side’s answers as factual, they are for the most part lies and based on fraud. Remember more than 85% of all mortgages in the last few years were securitized and their notes and mortgages effectively separated and your clients had no say in it. They did not sign any document to allow the banksters to do so. Most mortgages were paid in full prior to settlement and no one told your client that that was the case.
Dear lawyer do the right thing do not become a predator yourself, set up a viable tracking system for your letters and correspondence, get hooked with a decent and capable mortgage audit firm. Mr. Kaiser’s firm does a fantastic job as do others and many people are kicking the banksters butts due to those audits. We keep getting phone calls from lawyers with a smile in their face after a judge has scolded the other side, reversed judgments, and reverse foreclosures, do not take their rescission arguments as factual, remember the paradigm changed and you, the courts and the decent and hard working people who were swindled had no idea until now. And also do not be selfish, I have seen lawyers who refuse to share the knowledge you have acquired here with others believing their will corner the “market”, believe me I do not think that any one of you will be able to represent 15,000,000 families in danger of foreclosure or who were victims of this massive pozi scheme. By not helping other fellow lawyers or not teaching other to fight the good fight properly, will create bad legal precedent since those other lawyers will have no idea how to move through the crap these vultures laid out.
Let us all transform this mess into hope and let the law of the land rule in your favor.
great news from kansas supreme court,but rest assured the corrupt judiciary of florida will not follow suit in the path taken by kansas.
Great news guys! I stated in a recent Motion for Sanctions, in a notarized Declaration of the Facts, that MERS held no title, issued no credit and acted in no lending capacity…this helps certify my Fact. Thus rendering all subsequent assignments(fraudulent they were) VOID AB INITO.
Question re: Removing cases to Federal Court.
Do I want to remove my case to Federal Court on the grounds the Plaintiff is not domestic and I am moving for Sanctions well over $75,000? Or do I want this to stay in State District?
Thanks!
Dear Neil,
Thank you for so much helpful information. I have been fighting my own battle for several months now. My home was scheduled to foreclose on March 24th, as CitiMortgage refused my December 08 payment.
I even called 2 times to make sure it wasn’t a glitch by a customer service person. Anyway, I began asking questions to Citi and to Trott and Trott (400 lawyer team in Michigan foreclosing on everyone). While Trott and Trott literally never answered my basic questions such as, “Who is the holder in due course?” and “Do you have a right to foreclose?” Citi made an attempt to answer 3 of my 20 questions. I was surprised at thier selection and I can tell you they didn’t answer, “Are you the holder in due course?” or any questions of the like.
They had postponed my sheriff’s sales 13 times and finally sold it Sept 1st, 2009. I found out becuase I called. The part I want to enquire to lawyers about is, I looked up the foreclosure by advertisement law in Michigan and MCL 600.3220 which states that they must by law post in the same newspaper a notice thereof appended to the orignal notice of sale the adjourment.
They did not…100% positive and it is likely they did not for many more people than myself. I would like to file a class action against them. In addition, this foreclosure company does, “LOAN MODIFICATIONS” and has been one of the advisors on new legislation of foreclosures in Michigan. “yeah for the people,….. NOT.”.
Any advise is good advice. Thanks,
Please email me if you have light into a class action.
Jason
Jason
The dirty, deceptive and fraudulent evil machine it’s breaking down, this is the beginning of a long a hard battle ahead, America shall prevail.
robert post an email too, above and beyondd the phone number if you do not mind for your wells fargo class action.
The tide is turning in all areas of our society. ACORN is breaking down. Americans finally protested in great numbers in Washington this past weekend on many important issues that our government and financial institutions are ignoring. This case proves that some of the judges and our judicial systems are of the people and for the people. I applaud the Judge making this decision and Neil Garfield for their honest and integrity filled work!
One of the worst offenders in the foreclosure mess is Wells Fargo. If you are a potential victim of WF and want information about a class action suit we are putting together please call Robert 860-599-5557. Again great job Neil for all you do.
Awesome. The court did not know how to describe the meaning of MERS as nominee so they actually said this:
” …What meaning is this court to attach to MERS’s designation as nominee for Millennia? The parties appear to have defined the word in much the same way that the blind men of Indian legend described an elephant–their description depended on which part they were touching at any given time. …”
Wow. Talk about telling it like it is …
Thanks,
Dan Edstrom
dmedstrom@hotmail.com
Awesome.
Also, check out this cartoon regarding promissory notes/securitization:
http://eggsistense.com
Neil and Brad
Check your email
Wow! This is exciting to read, especially as my own anti-foreclosure lawsuit heats up. BAC is trying to remove it to Federal court; we’re working on a motion to remand to state court. A lot of the information herein is pretty on point re: my case.