U.S. Bank National Assoc. v. McConnell

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No. 107,300

IN THE COURT OF APPEALS OF THE STATE OF KANSAS

U.S. BANK NATIONAL ASSOCIATION, as Trustee of the
SECURITY NATIONAL MORTGAGE LOAN TRUST 2006-2,
Appellee,

v.

STEVEN R. MCCONNELL, et al.,
Appellants.

SYLLABUS BY THE COURT

1.
Standing is a part of subject matter jurisdiction. The issue of standing may be
raised by a party or the court at any time. An appellate court has unlimited review over
whether a plaintiff had standing to bring an action.

2.
Standing is a question of whether the plaintiff has alleged such a personal
stake in the outcome of a controversy as to warrant invocation of the court's
jurisdiction and to justify the court exercising its remedial powers on the plaintiff's
behalf. A plaintiff must have a sufficient stake in the outcome of an otherwise
justiciable controversy in order to obtain judicial resolution of that controversy.

3.
K.S.A. 60-217 requires every action to be prosecuted in the name of the
real party in interest. Under the statute, commencement of an action by one who is
not the real party in interest can be corrected in certain circumstances, and the
correction relates back to the date the action was commenced.
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4.
K.S.A. 58-2323 provides that a promissory note follows the mortgage that secures
it.

5.
Title to a note and to the mortgage securing its payment pass by delivery, and
possession of the instruments and their production by the plaintiff is prima facie evidence
of the plaintiff's ownership of the note and mortgage.

6.
Kansas law favors keeping a mortgage and the right of the enforcement of the
obligation it secures in the hands of the same person or entity. Thus, the holder of a
promissory note secured by a mortgage does not need a formal assignment of the
mortgage in order to invest the note holder with ownership of the mortgage. The note
holder acquires ownership of the mortgage by having acquired the note unless the parties
to the transfer agree otherwise. Thus, the general rule is that the mortgage follows the
note.

7.
To oppose a motion for summary judgment, a party must come forward with
something of evidentiary value to establish a material dispute of fact. Mere allegations in
a pleading are not an effective substitute.

8.
Every factual dispute between the parties does not constitute a bar to summary
judgment if the factual dispute is not material to the ultimate outcome of the case.

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9.
When, contrary to the general rule, a mortgage is severed from the promissory
note it secures, it becomes impossible for the note holder to foreclose, unless the
mortgage holder is the agent of the note holder. Without the agency relationship, the
person or entity holding only the note lacks the power to foreclose on the mortgage in the
event of default; and the person or entity holding only the mortgage will never experience
default because only the holder of the note is entitled to payment of the underlying
obligation.

10.
A severance of the mortgage and the promissory note it secures may be cured by
the holder of the note becoming the holder of the mortgage before any judgment of
foreclosure.

11.
A spouse who does not sign a promissory note but who signs the mortgage
securing the other spouse's promissory note voluntarily consents to the alienation of his
or her homestead rights under K.S.A. 60-2301.

Appeal from Johnson District Court; THOMAS M. SUTHERLAND, judge. Opinion filed May 3,
2013. Affirmed.

James F. McMahon, of McConnell & McMahon, P.A., of Overland Park, for appellants.

Wendy M. Green and Linda S. Mock, of Shapiro & Mock, LLC, of Overland Park, for appellee.

Before MCANANY, P.J., HILL and LEBEN, JJ.

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MCANANY, J.: This is an action to foreclose on the mortgage of a home. The
district court granted summary judgment in favor of the plaintiff. The mortgagors Steven
McConnell and his wife, Janet McConnell, appeal. The McConnells raise a number of
issues regarding the propriety of U.S. Bank's foreclosure action and of the district court's
entry of summary judgment. Having considered each in detail, we find no error and
affirm the district court.

Facts

On July 13, 2005, Steven McConnell executed an adjustable rate promissory note
in the principal sum of $94,500 to be repaid in monthly installments over 30 years. Janet
McConnell did not sign the note. Flatirons Financial, LLC, originated the loan. The loan
was secured by a mortgage on the McConnells' home. Both Steven and Janet signed the
mortgage. The mortgage was recorded with the Johnson County Register of Deeds on the
following day.

In March 2008, Steven entered into a "Balloon Loan Modification Agreement"
with U.S. Bank (Bank), the holder of the note. At least by April 1, 2008, the note was in
default, and the McConnells do not dispute this fact.

In October 2008, the Bank filed this action to foreclose on the mortgage. The Bank
did not seek a personal judgment against Steven on the unpaid note.

On November 21, 2008, the court entered an order extending the McConnells' date
for filing their responsive pleading to December 24, 2008. Then on January 13, 2009, the
Mortgage Electronic Registration Systems (MERS) assigned the McConnell mortgage to
the Bank. As stated in In re Martinez, 444 B.R. 192, 196 (Bankr. D. Kan. 2011):

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"The MERS System, a database owned by MERSCORP, Inc., the parent
company of MERS, is designed to allow its members, which include originators, lenders,
servicers and investors, to accurately and efficiently track transfers of servicing rights and
beneficial ownership in the notes that are secured by the mortgages and deeds of trust
held by MERS."

When no responsive pleading was forthcoming from the McConnells on
December 24, 2008, the district court entered default judgment in favor of the Bank on
February 9, 2009. On February 20, 2009, the court ordered a sheriff's sale of the property.

Five days later, on February 25, 2009, the McConnells moved for leave to file
their answer out of time and to set aside the default judgment. The district court granted
both motions. In their answer, the McConnells admitted that Steven executed the note
and that they both executed the mortgage and that "they may be delinquent in their
mortgage payments." However, the McConnells disputed the Bank's ownership of the
note and the mortgage. The McConnells claimed the Bank was not the real party in
interest, had violated their homestead rights, and had violated the Kansas Consumer
Protection Act (KCPA), K.S.A. 50-623 et seq.

On March 17, 2009, the January 13, 2009, the MERS assignment of the mortgage
to the Bank was recorded.

On June 1, 2009, the Bank moved for summary judgment, asserting that it was the
holder of the note and mortgage, that the promissory note was in default, and that less
than 1/3 of the principle of the note had been repaid. In support of its motion the Bank
included (1) an affidavit of Kathy Watson, the asset manager of the company that
serviced loans for the Bank, with an accompanying ledger detailing the mortgage loan
records; (2) the August 8, 2008, "Notice to Collect Debt" letters addressed to the
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McConnells; (3) an unofficial reinstatement letter detailing the reinstatement totals; and
(4) a document dated January 13, 2009, detailing the assignment and transfer of the
mortgage from MERS to the Bank.

The McConnells failed to respond to the motion, and the court entered summary
judgment in favor of the Bank on July 15, 2009.

On August 5, 2009, the Bank moved to set aside the judgment, stating that "the
parties have agreed to set aside the Judgment in anticipation that the Debtor will be able
to bring the loan current." On August 6, 2009, the district court granted the motion and
set aside the judgment.

On July 30, 2010, the McConnells filed their brief opposing the Bank's summary
judgment motion. There followed various continuances. The hearing on the Bank's
motion was continued from April 22, 2011, to June 27, 2011, to allow the McConnells
time to review the assignment documents and to submit additional discovery requests to
the Bank.

At the June 27, 2011, hearing on the summary judgment motion, the McConnells'
counsel asked for a further continuance to conduct more discovery because "the note
didn't transfer with the mortgages necessarily, or at least I can't tell. . . . I don't understand
how MERS could then transfer what they don't own." The Bank's counsel replied,
"MERS is an agent, pure and simple." Upon questioning by the court, the Bank's counsel
stated, "This loan was transferred into MERS at one point in time in—it's been
transferred several times. It was transferred into MERS at one point in time into the
MERS system and it has since been transferred out. It was actually transferred out quite
some time ago." The court denied a continuance but permitted the Bank to file a reply
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brief on these issues before ruling on the merits. Thereafter, the Bank filed its reply, and
the McConnells filed their final response.

On July 30, 2011, the district court granted U.S. Bank's motion for summary
judgment. The court ruled:

 U.S. Bank was the holder of the note and was entitled to enforce both the
note and the mortgage.
 The McConnells' claims that U.S. Bank violated the KCPA were not
properly identified as counterclaims and were also not substantiated by
anything of evidentiary value.
 Janet McConnell, by signing the mortgage, consented to the alienation of
the homestead under K.S.A. 60-2301; therefore, the mortgage was
enforceable as to her.

On October 4, 2011, the district court entered its final judgment, and the
McConnells then appealed.

Standard of review

The parties are well acquainted with the standards for granting summary
judgment. They are stated in detail in O'Brien v. Leegin Creative Leather Products, Inc.,
294 Kan. 318, 330, 277 P.3d 1062 (2012). In our de novo review of the Bank's motion,
we apply those same standards.
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Standing

The McConnells challenge the Bank's standing in this foreclosure action because it
was not the holder of the note and mortgage on the day suit was filed.

In Kansas, standing is a part of subject matter jurisdiction, and the issue may be
raised by the parties or the court at any time. Vorhees v. Baltazar, 283 Kan. 389, 397, 153
P.3d 1227 (2007). We have unlimited review over whether the Bank had standing to
bring this foreclosure action. See Board of Sumner County Comm'rs v. Bremby, 286 Kan.
745, Syl. ¶ 1, 189 P.3d 494 (2008).

"Standing is a question of whether the plaintiff has alleged such a personal stake
in the outcome of a controversy as to warrant invocation of jurisdiction and to justify
exercise of the court's remedial powers on his or her behalf. A party must have a
sufficient stake in the outcome of an otherwise justiciable controversy in order to obtain
judicial resolution of that controversy. The party must have personally suffered some
injury and there must be a causal connection between the injury and the challenged
conduct." Mortgage Electronic Registration Systems v. Graham, 44 Kan. App. 2d 547,
Syl. ¶ 1, 247 P.3d 223 (2010).

There is no question that the Bank held the note before filing this foreclosure
action. The Bank and Steven entered into a loan modification agreement dated March 7,
2008, in which Steven acknowledged that the Bank held the note and the mortgage at the
time. Steven signed the agreement and his lawyer, the same lawyer representing the
McConnells in this foreclosure, witnessed Steven's signature. But this suit was filed on
October 2, 2008, and the mortgage was not formally assigned to the Bank until January
13, 2009.

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K.S.A. 60-217 provides that "[e]very action shall be prosecuted in the name of the
real party in interest." The statute further provides:

"No action shall be dismissed on the ground that it is not prosecuted in the name of the
real party in interest until a reasonable time has been allowed after objection for
ratification of commencement of the action by, or joinder or substitution of, the real party
in interest; and such ratification, joinder or substitution shall have the same effect as if the
action had been commenced in the name of the real party in interest." K.S.A. 60-217.

Thus, it is apparent that commencement of an action by one who is not the real party in
interest can be corrected in certain circumstances, and the correction relates back to the
date the action was commenced.

In Kansas, it has been the law since 1899 that the note follows the mortgage. In
other words, if one holds the mortgage, it necessarily follows that one also holds the note
that the mortgage secures. Thus, K.S.A. 58-2323 provides: "The assignment of any
mortgage as herein provided shall carry with it the debt thereby secured." The question is
whether the converse is true: Does the mortgage follow the note? If not, can the absence
of the mortgage be corrected by a later transfer and thereby satisfy the standing
requirement of K.S.A. 60-217?

In McLean v. JP Morgan Chase Bank Nat. Ass'n, 79 So. 3d 170 (Fla. Dist. App.
2012), the Florida District Court of Appeals dealt with a comparable situation. Chase
brought suit to foreclose on a mortgage given by McLean to secure his note, but the
mortgage was not assigned to Chase until 3 days after suit was filed. Chase moved for
summary judgment and attached an affidavit stating that it was the owner of the note and
mortgage but did not specify when Chase acquired the note in relation to the date suit was
filed. Citing Florida case authorities, the court noted:

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"'[A] mortgage is but an incident to the debt, the payment of which it secures, and its
ownership follows the assignment of the debt. If the note or other debt secured by a
mortgage be transferred without any formal assignment of the mortgage, or even a
delivery of it, the mortgage in equity passes as an incident to the debt . . . .'
. . . .
"Even in the absence of a valid written assignment, the 'mere delivery of a note
and mortgage, with intention to pass the title, upon a proper consideration, will vest the
equitable interest in the person to whom it is so delivered.' Johns v. Gillian, 134 Fla. 575,
184 So. 140, 143 (1938). Thus, where there is an indication that equitable transfer of the
mortgage occurred prior to the assignment, dismissal of the complaint is error, even if the
assignment was executed after the complaint was filed. See Salomon, 874 So.2d at 682-
83." 79 So. 3d at 173.

While this Florida court held that standing to foreclose could not be cured by an after-
filing assignment of the note, the court held that there were still ways in which the
plaintiff could establish standing to foreclose.

"Where the plaintiff contends that its standing to foreclose derives from an endorsement
of the note, the plaintiff must show that the endorsement occurred prior to the inception
of the lawsuit. If the note or allonge reflects on its face that the endorsement occurred
before the filing of the complaint, this is sufficient to establish standing. [Citation
omitted.]" 79 So. 3d at 174.

Thus, the key document granting standing was the note, not the mortgage, since the
mortgage followed the note. Because the assignment of the note did not specify the date
on which the assignment occurred, Chase's summary judgment was reversed and the case
remanded for a determination of when Chase acquired the note in relation to the date suit
was filed. 79 So. 3d at 174-75.

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CitiMortgage, Inc. v. Patterson, ___ Ohio App. 3d ___, 984 N.E.2d 392 (2012),
presented a similar situation. The assignment of the mortgage to CitiMortgage occurred 9
days after CitiMortgage filed its mortgage foreclosure action. CitiMortgage obtained a
default judgment, and Patterson moved to set it aside, claiming CitiMortgage lacked
standing to foreclose. The district court set aside the default judgment and dismissed the
action on the grounds that CitiMortgage lacked standing to prosecute the action.

CitiMortgage argued that any defect in standing was cured when it obtained an
assignment of the mortgage before obtaining a default judgment against Patterson. The
Ohio Court of Appeals cited the Ohio Supreme Court's decision in Fed. Home Loan
Mtge. Corp. v. Schwartzwald, 134 Ohio St. 3d 13, 979 N.E.2d 1214 (2012), in which the
court stated that while the plaintiff could not obtain standing through a postfiling
assignment of the mortgage,

"'[h]ere, Federal Home Loan concedes that there is no evidence that it had suffered any
injury at the time it commenced this foreclosure action. Thus, because it failed to
establish an interest in the note or mortgage at the time it filed suit, it had no standing.'"
CitiMortgage, 984 N.E.2d at 396.

From this the CitiMortgage court reasoned that though the plaintiff did not obtain an
assignment of the mortgage until after suit was filed, unlike the plaintiff in Schwartzwald,
CitiMortgage held the note at the time it filed suit and being the holder of the note it had
standing to pursue this action. Thus, the trial court erred in setting aside CitiMortgage's
judgment. 984 N.E.2d at 398.

Here, the record conclusively shows that the Bank held Steven's note, which was
the subject of a loan modification agreement the parties entered into well before the Bank
initiated this foreclosure action.
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Kansas has long held that the holder of the note is also the holder of the mortgage
securing it. In Anthony v. Brennan, 74 Kan. 707, 87 P. 1136 (1906), the plaintiff obtained
an assignment of the mortgage from one, but not all, of the mortgagees before filing a
foreclosure action. The mortgagor claimed the plaintiff lacked standing, and the plaintiff's
later efforts to obtain assignments from the remaining mortgagees did not cure the
standing defect that existed at the time suit was filed. In rejecting the mortgagor's
argument, the court cited O'Keeffe v. National Bank, 49 Kan. 347, 30 P. 473 (1892), in
which the court held that "the title to a note and the mortgage securing its payment passed
by delivery, and that the possession of the instruments and their production at the trial by
the plaintiff furnished prima facie evidence of his ownership." Anthony, 74 Kan. at 708-
09.

In Middlekauff v. Bell, 111 Kan. 206, 207, 207 P. 184 (1922), our Supreme Court
held:

"An assignment of a mortgage is merely a formal transfer of title to the instrument, and
the assignment from the bank to the plaintiff was admittedly good for that purpose. The
plaintiff, however, did not need the assignment in order to invest her with ownership of
the mortgage. She acquired full title by purchase of the note which it secured, and the
assignment may be excluded from consideration without prejudice to her lien."

The court reasoned:

"'The mortgage is a mere security, creating a lien upon the property, but vesting no title.
The debt secured by the mortgage is the principal thing, and the mortgage the mere
incident following the debt wherever it goes, and deriving its character from the
instrument which evidences the debt.'" 111 Kan. at 208.

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Further, the Middlekauff court quoted Insurance Co. v. Huntington, 57 Kan. 744, Syl. ¶ 1,
48 P. 19 (1897): "'The assignment and delivery of a negotiable promissory note before
maturity operates as an assignment of a mortgage given as security for the payment of the
note.'" 111 Kan. at 209.

In a case with disparate facts, Army Nat'l Bank v. Equity Developers, Inc., 245
Kan. 3, 17, 774 P.2d 919 (1989), the court reaffirmed this notion by stating: "Our view is
that the mortgage follows the note. A perfected claim to the note is equally perfected as
to the mortgage."

Likewise, in MetLife Home Loans v. Hansen, 48 Kan. App. 2d 213, Syl. ¶ 5, 286
P.3d 1150 (2012), a panel of our court held that the mortgage follows the note when it
stated: "The transfer of an obligation or debt secured by a mortgage also transfers the
mortgage unless the parties to the transfer agree otherwise." Further: "Kansas law favors
keeping the mortgage and the right of the enforcement of the obligation it secures in the
hands of the same person or entity." 48 Kan. App. 2d 213, Syl. ¶ 6.

Finally, Restatement (Third) of Property (Mortgages) § 5.4(a) (1996) provides: "A
transfer of an obligation secured by a mortgage also transfers the mortgage unless the
parties to the transfer agree otherwise."

This approach is consistent with the reality of modern residential lending
practices, in which the lender or a later holder of the note ordinarily does not look to the
borrower's financial ability to satisfy a money judgment in the event of default on the
note, but rather to the value of the home which stands as collateral for the debt. That was
the case here, where the Bank did not seek a personal judgment against Steven but only
sought to foreclose on the residence which stood as collateral for the loan.

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Because the mortgage followed the note and there is no genuine fact issue about
the Bank being the holder of the note at the time suit was filed, we conclude that the
Bank had standing to pursue this foreclosure action. The formal assignment of the
mortgage after the date suit was filed did not create a genuine issue of material fact that
stood in the way of summary judgment because, under the analyses in JP Morgan Chase,
CitiMortgage, and the Kansas cases discussed above, the fact that the Bank held the
promissory note was sufficient to give it standing to pursue this action.

The McConnells' KCPA Counterclaims

The McConnells argue that the district court erred in granting summary judgment
to the Bank without first addressing the KCPA claims that they raised in their answer to
the petition for foreclosure and in their response to the Bank's motion for summary
judgment.

In the McConnells' answer to the Bank's petition, they alleged that the Bank
violated the KCPA by engaging in unfair and deceptive acts and practices, including: (1)
wrongful acceleration of the loan; (2) failure to provide the McConnells any opportunity
to mitigate or obtain mortgage forbearance or mortgage modification opportunities; and
(3) breach of the Bank's duty of good faith and fair dealing. The McConnells reiterated
these alleged violations of the KCPA in their memorandum in opposition to the Bank's
motion for summary judgment. The McConnells did not support these allegations with
any evidence or argument regarding the elements of the alleged KCPA violations.

In ruling on the Bank's motion for summary judgment, the district court stated:

"Defendants also argue that summary judgment cannot be granted without
considering whether Plaintiff has committed violations of the [KCPA]. Although the
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KCPA violations were [mentioned] in Defendants' Answer, they were not properly
identified as a part of a formal counterclaim and are currently unsubstantiated by
anything of evidentiary value. Therefore, the Court need not address Defendants' KCPA
arguments prior to considering Plaintiff's Motion for Summary Judgment."

The McConnells contend that the district court erred in stating that it was
necessary to formally allege their defenses as counterclaims before the court would
consider them. The McConnells point to K.S.A. 2012 Supp. 60-208(c), which provides:
"(2) Mistaken designation. If a party mistakenly designates a defense as a counterclaim or
a counterclaim as a defense, the court must, if justice requires, treat the pleading as
though it were correctly designated, and may impose terms for doing so."

But the district court also clearly stated that the McConnells' KCPA claims "are
currently unsubstantiated by anything of evidentiary value."

The McConnells claim that the Bank never responded to their allegations of
KCPA violations and that this failure to respond should be viewed as an admission of the
KCPA violations. But in its motion for summary judgment, the Bank specifically
responded to the McConnells' claims that it violated the KCPA:

"The Defendants assert that the Plaintiff violated the [KCPA] by engaging in
unfair and deceptive practices. They cite the Plaintiff's 'wrongful acceleration of the loan'
and the incursion of 'foreclosure related fees and costs' without first providing notice.
However, the acceleration was not wrongful since the Defendants have a balance due and
owning since March 1, 2008, and they were sent notice of their default on or about
August 8, 2008. Nor was the commencement of foreclosure proceedings wrongful, since
the Defendants are in default, have had proper notice, and have not taken the opportunity
to cure the default. The Plaintiffs have a right to bring suit under the terms of the
mortgage and note, and have satisfied all requirements to do so."

16

The McConnells did not respond to these assertions in opposing the Bank's summary
judgment motion.

To oppose a motion for summary judgment, a party must come forward with
something of evidentiary value to establish a material dispute of fact. O'Brien, 294 Kan.
at 330. "Summary judgment is appropriate on claims under the KCPA if there is no
evidence of deceptive or unconscionable acts. [Citations omitted.]" Bomhoff v. Nelnet
Loan Services, Inc., 279 Kan. 415, 424, 109 P.3d 1241 (2005).

K.S.A. 2012 Supp. 60-256(e)(2) provides:

"When a motion for summary judgment is properly made and supported, an
opposing party may not rely merely on allegations or denials in its own pleading; rather,
its response must, by affidavits or by declarations pursuant to K.S.A. 53-601, and
amendments thereto, or as otherwise provided in this section, set out specific facts
showing a genuine issue for trial. If the opposing party does not so respond, summary
judgment should, if appropriate, be entered against that party."

No such evidence was forthcoming from the McConnells, and their mere
allegations in a pleading are not an effective substitute. K.S.A. 2012 Supp. 60-256(e)(2).
Even on appeal, they have not provided any argument to support their contentions that
the Bank violated the KCPA. Issues not briefed are deemed abandoned. See Superior
Boiler Works, Inc. v. Kimball, 292 Kan. 885, 889, 259 P.3d 676 (2011).

The McConnells have failed to present any evidence which would create a genuine
issue of material fact regarding their KCPA claims which would bar summary judgment.

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Appropriateness of Summary Judgment

The Bank presented a prima facie case for summary judgment based on evidence
that Steven signed the note and Steven and Janet signed the mortgage, that Steven has
defaulted in the repayment of the note, and that the Bank is now the holder of the note
and the mortgage. See Hansen, 48 Kan. App. 2d at 218. The McConnells raise a number
of assertions which they claim bar the entry of summary judgment against them.

First, the McConnells refer to a law review article by Christopher Peterson,
Foreclosure, Subprime Mortgage Lending, and the Mortgage Electronic Registration
System, 78 U. Cin. L. Rev. 1359 (2010), which the McConnells claim "gives great insight
as to the inner works of MERS and the problems that arose as a result of the use of
MERS and the securitization process in the subprime mortgage market." The McConnells
then "incorporate the law review article" in their appellate brief but do not explain how it
supports the arguments they now make in opposing summary judgment.

Next, the McConnells contend that the record does not establish the chain of title
of the mortgage. They claim that the Bank presented no evidence regarding the transfer
or assignment of the note. The Bank responds that a complete chain of title was produced
to the court. But the controlling factor is whether the Bank was the holder of the note and
mortgage so as to have standing to bring this action. As discussed above, that clearly was
the case.

But the McConnells argue that the note was not negotiable because Steven was
already in default when the purported transfer to the Bank occurred. The McConnells
base this argument on the assertion that the Bank could not have been a holder in due
course under K.S.A. 84-3-302. It is true that a holder in due course takes the instrument
and may enforce it without being subject to the obligor's defenses. See K.S.A. 84-3-302,
18

Comment 4; Kaw Valley State Bank & Trust Co. v. Riddle, 219 Kan. 550, 555, 549 P.2d
947 (1976). But the Bank was still the holder of the note, and the McConnells have failed
to present facts supported by a viable legal theory that bar summary judgment on the note
which clearly was in default.

Next, the McConnells claim the district court erred in requesting additional
pleadings "with no concomitant right to discovery, especially regarding the documents
that were first produced to Defendants' counsel earlier that day." Unlike the de novo
review of the Bank's summary judgment motion which we have conducted so far, this
argument is premised on the district court having abused its discretion on a discovery
question. Troutman v. Curtis, 286 Kan. 452, 458-59, 185 P.3d 930 (2008).

The district court did not permit the filing of additional pleadings. Rather, the
judge allowed additional briefing, following which "[i]f I determine that there's still some
unanswered questions or issues, then I'll probably grant [the defendants] some time for
additional discovery." The parties provided additional briefing. In their final brief, the
McConnells sought additional discovery on the chain of title to the note and mortgage.
The district court denied additional discovery, stating:

"This matter has been pending since October 8, 2008. Now almost three years later,
Defendants claim that further discovery is necessary. This Court finds that Defendants
have had ample time to conduct discovery, and the Court has delayed ruling on the merits
of the subject Motion for well over a year. . . . [T]he Court finds that Defendants have
been given more than enough time to conduct discovery."

We find no abuse of the district court's discretion in this ruling.

19

Finally, the McConnells claim that the documents and affidavits provided in
support of the Bank's motion for summary judgment contained hearsay statements. They
specifically attack the affidavit of Kathy Watson, the asset manager of the company that
serviced the loan.

But Watson's affidavit was introduced to establish that Steve was in default on the
note, a fact which was uncontroverted. Through Watson's affidavit the Bank established
the unpaid balance on Steven's promissory note. But the Bank is not seeking a personal
money judgment against Steven, only foreclosure of the mortgage. Watson asserts that
less than one-third of the original balance of the note has been repaid, and the
McConnells admit this fact. While the McConnells question the calculation of interest on
the note, because no personal judgment is being sought against Steven and there is no
issue about redemption rights in view of the agreed unpaid principle on the loan, any
dispute regarding the facts contained in the Watson affidavit do not involve disputed
issues of material fact which precludes summary judgment.

Severance of the Note from the Mortgage

As a stand-alone argument against granting summary judgment of foreclosure, the
McConnells argue that the note and the mortgage were severed when the note was held
by the Bank and the mortgage was held by MERS. They claim that the severance cannot
be cured by MERS's subsequent assignment of the mortgage to the Bank.

Our Supreme Court described the problems that arise when a mortgage is
separated from the promissory note it secures by quoting Bellistri v. Ocwen Loan
Servicing, LLC, 284 S.W.3d 619, 623 (Mo. App. 2009), in which the Bellistri court
stated:

20

"'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.'" Landmark Nat'l Bank v. Kesler, 289 Kan. 528, 540, 216 P.3d 158 (2009).


Thus, our Supreme Court held: "Indeed, in the event that a mortgage loan somehow
separates interests of the note and the [mortgage] with the [mortgage] lying with some
independent entity, the mortgage may become unenforceable." (Emphasis added.) 289
Kan. at 540.

While the McConnells argue Steven's note became severed from the McConnells'
mortgage, they fail to explain how the note holder's interest and the mortgagee's interest
could not later be reunited before judgment.

First, we note our earlier discussion in the section on standing regarding the law in
Kansas that a promissory note and the mortgage securing it are, as a general rule,
inseparable. Bank Western v. Henderson, 255 Kan. 343, 354, 874 P.2d 632 (1994);
Middlekauff, 111 Kan. at 207. Generally, "'the mortgage follows the note. A perfected
claim to the note is equally perfected as to the mortgage.'" Bank Western, 255 Kan. at 354
(quoting Army Nat'l Bank, 245 Kan. at 17). The assignment and delivery of a negotiable
promissory note operates as an assignment of the mortgage given as security for payment
of the note. Middlekauff, 111 Kan. at 209.

But even if the interests of the note holder become separated from the interests of
the mortgage holder, we see no impediment to a foreclosure action if those interests are
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subsequently reunited before judgment. The approaches used by the courts in Ohio and
Florida in CitiMortgage and JP Morgan Chase discussed earlier are logical, practical,
and consistent with our law. Under Kansas law the mortgage follows the note. But any
arguable severance of the note holder's interest from the mortgage holder's interest should
be able to be cured with the transfer of the mortgage to the Bank, even if that occurs after
suit was filed so long as the transfer occurs before the Bank moves for summary
judgment.

But the McConnells argue that it was MERS that made the assignment of the
mortgage to the Bank, and because MERS served only as the morgagee's "nominee" and
as a "digital mortgage tracking service," MERS had no rights in the mortgage which it
could assign to the Bank. If this is true, then MERS's holding the mortgage as a
"nominee" while the lender continued to hold the promissory note did not result in a
splitting of the interests. In In re Martinez, 444 B.R. 192 (Bankr. D. Kan 2011), the court
determined that in this context the terms "nominee" and "agent" are interchangeable. The
court concluded: "Because MERS was holding the Mortgage in question as an agent of
Countrywide, the Court finds that the Note and Mortgage were never split, and remain
enforceable." 444 B.R. at 206. See Landmark Nat'l Bank, 289 Kan. at 539, wherein our
Supreme Court characterized MERS as a mere "straw man."

As stated in Restatement (Third) of Property (Mortgages) § 5.4(c): "A mortgage
may be enforced only by, or on behalf of, a person who is entitled to enforce the
obligation the mortgage secures." The Bank is the holder of the note. Steven
acknowledges that he signed the note and that he is in default. The McConnells
acknowledge that they signed the mortgage securing the note. The Bank has sued to
foreclose on the mortgage but is not seeking a personal judgment against Steven. The
McConnells would have us declare the mortgage entirely unenforceable and thereby
create an unwarranted windfall for them. A mortgage foreclosure is a proceeding in
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equity. Karnes Enterprises, Inc. v. Quan, 221 Kan. 596, 602, 561 P.2d 825 (1977). The
McConnells' position is inconsistent with principles of equity and contrary to the
Restatements' admonition against unwarranted windfalls. See Restatement § 5.4,
Comment (e).

Homestead Rights

Finally, the McConnells argue that Janet signed only the mortgage but not the
promissory note or the loan modification agreement; thus, she has not consented to the
impairment of her homestead rights in the family residence.

K.S.A. 60-2301 provides:

"A homestead to the extent of 160 acres of farming land, or of one acre within
the limits of an incorporated town or city, or a manufactured home or mobile home,
occupied as a residence by the owner or by the family of the owner, or by both the owner
and family thereof, together with all the improvements on the same, shall be exempted
from forced sale under any process of law, and shall not be alienated without the joint
consent of husband and wife, when that relation exists; but no property shall be exempt
from sale for taxes, or for the payment of obligations contracted for the purchase of said
premises, or for the erection of improvements thereon. The provisions of this section shall
not apply to any process of law obtained by virtue of a lien given by the consent of both
husband and wife, when that relation exists." (Emphasis added.)

Janet signed the mortgage whereby the family residence became security for Steven's
loan. The homestead rights described in K.S.A. 60-2301 do not apply when both spouses
have consented to a lien on the property. Janet clearly consented to the mortgage lien
which the Bank now seeks to foreclose.

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Based upon our examination of the record and the applicable law, the Bank has
demonstrated that there exists no genuine issue of material fact and that it is entitled to a
judgment of foreclosure as a matter of law. None of the arguments presented by the
McConnells creates a disputed issue for trial. The district court correctly granted
summary judgment in favor of the Bank.

Affirmed.