Week 5 Assignment-Bus Law

8/3/2019 Week 5 Assignment-Bus Law

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Gray, Marisa

Business Law, MGMT 525, Fall 2011

Instructor: Douglas W. McNett

Using the format suggested in the Appendix of Chapter 1 (pg.24-25) draft case briefs for

the holdings of the Kansas Supreme Court Decisions in Landmark Nat'l Bank v. Kesler,

289 Kan. 528 (2009) and Mortgage Elec. Registration Systems v. Graham, 44 Kan. App.

2d 547 (2010).

1. Case Name:Kansas Supreme Court Landmark National Bank v. Kesler

289 Kan. 528 (2009)

Mortgage Electric Registration Systems v Graham,

44 Kan. App 2d 547 (2010)

289 Kan. 528 (2009)

44 Kan. App 2d 547 (2010)

2. Statement of FactsThe Supreme Court of Kansas issued a ruling that has implications for the

mortgage industry.

The authority of Mortgage Electronic Registration Systems, Inc. (MERS) as listed

as the actual owner of the registered loans.


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In March 2004, Boyd Kesler secured a loan from Landmark National Bank with a

mortgage registered in Kansas. The following year, he secured a loan from

Millennia Mortgage Corporation (Millennia), which was registered in MERSa

name and subsequently transferred to Sovereign Bank (Sovereign) but there is not

record of the transfer.

In 2006, Kesler filed for bankruptcy and Landmark filed a petition to foreclose on

its mortgage.

Sovereign then filed a motion to set aside or vacate the default judgment shortly

thereafter because MERS was a statutorily necessary party to the suit. Since

MERS was not named as a defendant as the mortgagee of record, Sovereign did

not receive notice of the proceedings. The trial court determined Sovereign was

barred from asserting rights to the mortgage because it had not properly registered

its ownership interest with the county clerks office. Additionally, the court

determined that even though MERS was named as a mortgagee, it had no interest

in the underlying property.

In the second case, the Plaintiff, Michelle Martinez now Graham, filed the

complaint to determine secured status pursuant in objection to the proof of claim

filed by Countrywide. She feels she is entitled to judgment against MERS

because she owes no debt to MERS. She claims she is entitled to, an ordering

sustaining her objection to the Proof of Claim filed by Countrywide, which was a

secured claim. Country is effectively unsecured, and is not the holder of the


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mortgage originally intended to reserve.

The question becomes whether the identities of mortgages and lenders are so

intertwined and if separated they might invalidate the mortgage.

Michelle Graham delivered a promissory note to Countrywide where she

promised to pay Countrywide the sum of $140,000.00 plus interest. The loan was

made to Graham to purchase real property located in Topeka, Kansas.

Countryside has remained the holder of the Note since Graham signed it.

3. The body of the courts decision.The court ruled that if MERS is only the mortgagee, without ownership, it had no

enforceable right because it was not entitled to any property.

The court affirmed the Kansas Court of Appeals, saying that the trail court did not

abuse its discretion in denying the motions to vacate the default judgment because

the record lacked evidence.

In the second case, Countryside appointed MERS to act as its agent to hold the

Mortgage as nominee on Countrywide S behalf, and on behalf of

Countrywides successor and assigns. MERS was created to hold legal title to

mortgages (or deeds of trust in non-judicial foreclosure states. Its intent was to

eliminate the need for mortgage assignees to record assignments to protect their

interest and facilitate the purchase and sale of mortgages in the secondary market.


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4. The policy issue, however, is the most far-reaching. In discussing the amicuscuriaes argument that MERS provides a cost-efficient method of tracking

mortgages without needing a county-by-county search, the court raised the

concern that a single entity holding a multitude of mortgages made it difficult to

identify the current note holder. Further, the court stated MERS was attempting

to circumvent the statutory registration requirement for notice, leaving the public

with no notice of who holds the obligation on a mortgage. This decision is

notable because it weakens the MERS system. While the ruling is only binding in

Kansas, the outcome could mean other jurisdictions will take a harder look at

whether MERS has adequate standing as a creditor in a bankruptcy or foreclosure

proceeding. The wider impacts could be felt as courts push for more transparency

in the ownership of mortgages, which would require the registration of many

deeds previously recorded only in MERS.

5. Procedural HistoryMERS filed a foreclosure action against Debtor in state court because the last

regular payment Graham had made was in May 2004. In February 2005, the

bankruptcy was dismissed prior to confirmation when Debtor failed to timely file

and amended plan, as the Court required. Three months later, May 2005, Debtor

filed a second bankruptcy petition, but again she failed to make timely pay the

amounts due on the Note. During the litigation, Debtor asserted that because

MERS was Countrywides agent, it should be responsible for the same acts as

Countrywide.


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6. The body of the courts opinionIn February 2008, the court granted summary judgment to MERS on its

foreclosure claim, and to both MERS and Countrywide on Debtors counterclaims

and third party claims, against them.

7. Courts DecisionThe Court finds the summary judgment should be entered in favor of the

Defendants in this case.

Although the Mortgage was held by MERS and the Note was held by

Countrywide, evidence demonstrates that MERS was acting as an agent for

Countrywide and no fatal splitting of the Note and Mortgage occurred.

The wider impact was a push for more transparency in the ownership of

mortgages, which would require the registration of many deeds previously

recorded only in MERS.

References:

www.ksb.uscourts.gov/images/ksb_opinions/JMK_10-07027-58.pdf

www.landmark-natl-bank-v-kesler
http://www.ksb.uscourts.gov/images/ksb_opinions/JMK_10-07027-58.pdfhttp://www.ksb.uscourts.gov/images/ksb_opinions/JMK_10-07027-58.pdfhttp://www.landmark-nat%27l-bank-v-kesler/http://www.landmark-nat%27l-bank-v-kesler/http://www.landmark-nat%27l-bank-v-kesler/http://www.landmark-nat%27l-bank-v-kesler/http://www.landmark-nat%27l-bank-v-kesler/http://www.ksb.uscourts.gov/images/ksb_opinions/JMK_10-07027-58.pdf

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Week 5 Assignment-Bus Law