Martinez v. Mortgage Electronic Registration Systems, Inc. (In Re Martinez)
444 B.R. 192
| Bankr. D. Kan. | 2011Background
- Graham executed a promissory note to Countrywide on Aug 12, 2002 for $140,000 secured by a mortgage on Nottingham property.
- The Mortgage named MERS as the nominee for the lender, Countrywide, and identified Countrywide as the note holder.
- MERS held the mortgage as nominee and could foreclose per the lender's instructions, with the mortgage properly recorded.
- Debtor-defaulted, MERS filed foreclosure in state court; bankruptcy proceedings followed and were dismissed for nonpayment.
- Kansas decisions Landmark National Bank v. Kesler and Graham addressed MERS standing and note-mortgage split issues, but did not directly decide rights of the note holder or agency in all contexts.
- The court held MERS acted as Countrywide’s agent; thus the note and mortgage were not split and Countrywide’s security interest remained enforceable through MERS or directly.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Effect of MERS holding on enforceability | Graham: MERS lacks standing as holder of note | Countrywide/MERS: MERS as agent preserves security interest | Note remains secured; agency negates split |
| Whether the note and mortgage were split under Restatement principles | Split occurred, rendering mortgage unsecured | No split due to agency relationship between Countrywide and MERS | No fatal split; agency relationship exists |
| Res judicata impact of Graham/Landmark on foreclosure rights | Graham/Landmark bars foreclosure | Res judicata not satisfied due to lack of merits judgment; differing parties & opportunity | Res judicata does not bar; prior decisions not controlling here |
| Whether Countrywide’s claim should be treated as unsecured | Countrywide does not own the note | Countrywide’s claim remains secured via agency-held mortgage | Countrywide’s claim is secured through the agency relationship with MERS |
| Procedural posture under Rule 7013 (compulsory counterclaim) | Foreclosure should be compelled counterclaim | Foreclosure claim arose before relief order; not compulsory counterclaim | Rule 7013 not requiring compelled counterclaim; foreclosure pre-relief |
Key Cases Cited
- Landmark National Bank v. Kesler, 289 Kan. 528, 216 P.3d 158 (2009) (Kan. 2009) (MERS as straw man; standing concerns in foreclosure)
- Graham, 44 Kan.App.2d 547, 229 P.3d 420 (Kan.App.2010) (Kan.App. 2010) (MERS lacks standing when not showing agency or interest in note)
- In re Tucker, 441 B.R. 638 (Bankr.W.D. Mo.2010) (Bankr.W.D. Mo. 2010) (Agency relationship supports enforceability of mortgage)
- Bellistri v. Ocwen Loan Servicing, LLC, 284 S.W.3d 619 (Mo.Ct.App.2009) (Mo.Ct.App. 2009) (Restatement influence on split note-mortgage analysis)
- Scholastic Book Clubs, Inc. v. Scholastic Book Clubs, 260 Kan. 528, 920 P.2d 947 (1996) (Kan. 1996) (Kansas agency principles support recognizing agency even if terms differ)