Editor: David Reiss
Brooklyn Law School

March 2, 2013

Kansas Court of Appeals Holds that Severance of Mortgage and Note Cured by Subsequent Assignment of Mortgage from MERS to Bank

By Gloria Liu

In U.S. Bank v. Howie, 280 P.3d 225 (Kan. App., 2012), the court held that U.S. Bank had standing to foreclose because there was an agency relationship between MERS and U.S. Bank. It also upheld that severance can be cured by MERS’s subsequent assignments. Therefore, it falls under the agency relationship exception of unenforceability when the mortgage is not held by the same entity that holds the promissory note. The homeowner, James Howie executed a promissory note to U.S. Bank and executed a mortgage on real property they owned in Ottawa. Under the terms of the mortgage, the Howies were named as the borrower, U.S. Bank as the lender, and MERS was named as the mortgagee “acting solely as a nominee for Lender and the Lender’s successors and assigns.” The mortgage stated: “Borrower understands and agrees that MERS holds only legal title to the interests granted by Borrower in this [Mortgage], 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 including, but not limited to, releasing and canceling this [Mortgage.]:” When the note entered into default following James’ death, MERS assigned the mortgage to U.S. Bank, which subsequently filed an action to foreclose the mortgage. The lower court held that even if there was no agency relationship between MERS and U.S. Bank such that the note and the mortgage were severed, any severance was cured by MERS’s subsequent assignment of the mortgage to U.S. Bank. The Appellate court agreed but also found that according to the plain language of the Mortgage, MERS was acting as an agent of U.S. Bank at all relevant times.

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