Editor: David Reiss
Brooklyn Law School

March 28, 2013

Kansas Bankruptcy Court Finds that Agency Relationship Exists With Use of the Word “Nominee”

By Gloria Liu

Martinez v. MERS, et al., No. 09‐40886, 2011 WL 489905 (Bankr. D. Kan. Feb. 10, 2011), the court held that assignment of the Note and Mortgage to different entities does not render them void because such a split may be performed when there is an “agency relationship” between the holder of the note and the holder of the mortgage. The court also looked to the language of the mortgage and found that there was sufficient evidence to demonstrate that MERS was acting as the agent for the lender. MERS also submitted the affidavit of its Treasurer to demonstrate that an agency relationship existed. The court reasoned, “the fact that MERS and Countrywide chose to use the word “nominee,” rather than “agent,” does not alter the underlying relationship between the two parties.”

The homeowner executed and delivered a promissory note to Countrywide. The loan was made to enable the homeowner to purchase real property, which she claimed as her exempt homestead in the bankruptcy proceeding. Countrywide has remained the holder of that note. To secure repayment of the debt to Countrywide and its successors and assigns, the homeowner signed a mortgage on the property to “MERS, as the nominee for Countrywide and its successors and assigns.” The mortgage specifically identifies the lender as Countrywide Home Loans, Inc., the same Lender identified in the note, the amount of the mortgage is identical to the amount borrowed under the note, and the mortgage instrument, itself, grants Countrywide various rights. The Mortgage further states that: “MERS holds only legal title to the interests granted by Borrower in this Security Instrument, 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 or 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.” The mortgage was properly and timely recorded with the county.

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