FV-I, Inc. v. Kallevig
111235
| Kan. | Apr 21, 2017Background
- FV-I, Inc. filed a mortgage-foreclosure petition in June 2011 against the Kallevigs; Bank of the Prairie (BOP) held three junior mortgages and contested priority and FV-I's standing.
- FV-I attached to its petition a copy of the note without certain endorsements; at trial FV-I produced the original note containing two additional stamp endorsements (including an endorsement in blank) and an assignment of the mortgage.
- The district court excluded the two additional endorsements as inadequately founded business records, then ruled FV-I lacked standing at the time of filing and that the note and mortgage had split, making FV-I’s mortgage unenforceable and BOP’s mortgages superior.
- The Kansas Court of Appeals affirmed, holding FV-I failed to prove enforcement rights in the note at filing and therefore lacked standing.
- The Kansas Supreme Court agreed that a foreclosing party must have enforcement rights in the note at the time the suit is filed, but reversed the exclusion of the endorsements as erroneous and remanded for a new hearing on whether FV-I possessed the endorsed note when it filed.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| When must standing be proved in a foreclosure? | Standing can be established by trial; need not exist at filing so long as cured before judgment. | Must exist when suit is filed; post‑filing assignments cannot cure lack of standing. | Standing must exist at time of filing; lack of standing cannot be cured by post‑petition assignment (remand to determine if FV‑I had standing at filing). |
| Is possession of the mortgage alone sufficient for standing? | Possession of the mortgage before filing suffices to invoke jurisdiction. | Mortgage alone is insufficient without enforcement rights in the note. | Mortgage possession alone is insufficient; plaintiff must have enforcement rights in the note. |
| Were the stamped endorsements admissible evidence of enforcement rights? | Endorsements on the original note (including stamped signatures) should be admitted; signatures presumed valid under UCC. | Exclude endorsements for lack of proper business-record foundation and hearsay. | District court erred excluding endorsements; UCC presumption of authenticity applies and existence of endorsements (not their truth) is dispositive for enforcement rights. |
| Effect of a split between note and mortgage on priority? | FV‑I: mortgage assignment preserves priority if note/mortgage reconciled. | BOP: split made FV‑I’s mortgage unenforceable so BOP's mortgages advance in priority. | Mortgage still exists; priority determination remanded for application of Kansas law after standing is resolved. |
Key Cases Cited
- Landmark Nat'l Bank v. Kesler, 289 Kan. 528 (Kan. 2010) (recognizes possibility and consequences of a split between note and mortgage)
- Gannon v. State, 298 Kan. 1107 (Kan. 2015) (defines standing as a question of law and allocates burden of proof)
- Solomon v. State, 303 Kan. 512 (Kan. 2016) (elements of standing: cognizable injury and causal connection)
- McConnell v. U.S. Bank N.A., 48 Kan. App. 2d 892 (Kan. Ct. App. 2013) (discusses when post‑filing mortgage assignments may cure issues where note holder had enforcement rights at filing)
- MetLife Home Loans v. Hansen, 48 Kan. App. 2d 213 (Kan. Ct. App. 2012) (holder of note has standing; mortgage follows the note unless parties agree otherwise)
- Daniels v. Army Nat'l Bank, 249 Kan. 654 (Kan. 1991) (on remedies available to payee/holder upon default)