FV-I, Inc., In Trust for Morgan Stanley Mortgage Capital Holdings, LLC, Appellant,
Constance M. Kallevig, et al., Defendants, and Bank of the Prairie, Appellee.
Standing is the right to make a legal claim or seek
enforcement of a duty or right. The question of standing is
one of law over which this court's scope of review is
unlimited. Standing is a part of subject matter jurisdiction,
and the issue may be raised by the parties or the court at
burden to establish standing rests with the party asserting
it. The nature of that burden depends on the stage of the
proceedings because the elements of standing are not merely
pleading requirements. Each element must be proved in the
same way as any other matter and with the degree of evidence
required at successive stages of the litigation.
the pleading stage, general factual allegations of injury
resulting from defendant's conduct may suffice to show a
plaintiff's standing, for on a motion to dismiss we
presume that general allegations embrace those specific facts
that are necessary to support the claim. In response to a
summary judgment motion, a plaintiff can no longer rest on
mere allegations and must set forth by affidavit or other
evidence specific facts that for purposes of the summary
judgment will be taken to be true. At the final stage of a
case, such facts, if controverted, must be supported
adequately by the evidence adduced at trial.
general, to have standing, a plaintiff must have a sufficient
stake in the outcome of an otherwise justiciable controversy
in order to obtain judicial resolution of that controversy.
Under Kansas law, in order to establish standing, a plaintiff
must show that (1) he or she suffered a cognizable injury and
(2) there is a causal connection between the injury and the
challenged conduct. A cognizable injury is established by
showing a personal interest in a court's decision and
that he or she personally suffers some actual or threatened
injury as a result of the challenged conduct. Moreover, the
injury must be particularized, i.e., it must affect
the plaintiff in a personal and individual way.
holder of a promissory note has standing to enforce the terms
of indebtedness, including the right to foreclose on a
mortgage that secures it.
Standing in a foreclosure action is predicated on the
plaintiff's ability to demonstrate-either in the
pleadings, upon motion for summary judgment, or at trial-
that it was in possession of the promissory note with
enforcement rights at the time it filed the foreclosure
action. Allowing a lack of standing to be cured by a
post-petition assignment granting enforcement rights in the
note after the foreclosure action has been filed defeats any
incentive for a note holder to ensure that it has enforcement
rights prior to filing the action.
this case, application of the business records exception to
the hearsay rule to exclude endorsements on a promissory note
was erroneous because the signatures were not being admitted
to prove the truth of the matter asserted, i.e., the
authenticity of the signatures. Rather, the existence of the
endorsements themselves was the element critical to the
enforcement rights at issue under the Uniform Commercial
UCC treats stamp signatures as equal to original signatures.
K.S.A. 84-3-308 creates a presumption that stamp signatures
are authentic. This presumption applies to endorsements as
well. A defendant has the burden to present sufficient
evidence denying an endorsement's validity before a
plaintiff is required to introduce evidence to the contrary.
Under the facts of this case, mere speculation based on
plaintiff's inconsistent legal positions or the timing of
its assertions was insufficient to meet the defendant's
order for a plaintiff to prevail in its mortgage foreclosure
proceeding, it must establish both that it possessed
enforcement rights in the note under Article 3 of the UCC,
K.S.A. 84-3-301, and that those rights existed at the time it
filed the action. This can be accomplished through the
pleadings, when faced with a motion for summary judgment, or
at trial. Possession or assignment of the mortgage alone when
the foreclosure action is filed is not sufficient to
establish standing, and the lack of standing cannot be cured
by a post-petition assignment of a promissory note. The
proper remedy for a lack of standing is dismissal without
Regardless of whether a promissory note and mortgage have
split, or whether the party capable of enforcing the note was
not a party to this case, the mortgage itself still exists.
of the judgment of the Court of Appeals in an unpublished
opinion filed February 6, 2015.
from Miami District Court; Steven C. Montgomery, judge.
of the Court of Appeals affirming the district court is
affirmed in part and reversed in part. Judgment of the
district court is affirmed in part, reversed in part, and
remanded with directions.
Merrill Wilson, of South & Associates, P.C., of Overland
Park, argued the cause, and Stephanie L. Mendenhall, of the
same firm, was with her on the briefs for appellant.
Timothy H. Girard, of Woner, Glenn, Reeder & Girard,
P.A., of Topeka, argued the cause and was on the briefs for
case stems from a mortgage foreclosure petition that
plaintiff/appellant FV-I, Inc. filed in June 2011. The
homeowner-debtors are no longer involved in this proceeding,
as the parties agreed to sell the property and place the
proceeds in escrow pending resolution of this case. The
dispute is between FV-I and Bank of the Prairie (BOP), a bank
with junior mortgages on the same property. Although summary
judgment was initially granted in BOP's favor, the Court
of Appeals reversed and remanded for trial to determine
whether FV-I had possession of the promissory note underlying
the mortgage at the time it filed the mortgage foreclosure.
FV-I, Inc. v. Kallevig, No. 108, 706, 2013 WL
2321198 (Kan. App. 2013) (unpublished opinion) (Kallevig
trial, FV-I presented the original note endorsed in blank and
the original mortgage with an assignment to FV-I, although it
had attached a previous copy of the note without the
endorsement in blank to the petition. The district court
held: (1) FV-I lacked standing to file the petition because
it did not have possession of the original note prior to
filing its petition; (2) the note and mortgage FV-I held had
split because these documents did not follow the same path to
FV-I; (3) FV-I lacked enforcement rights in the note because
FV-I had failed to lay the proper foundation for the
endorsement in blank on the note and therefore, the court
must exclude the endorsement in blank from evidence; and (4)
the first three rulings meant that BOP's mortgages were
therefore superior to FV-I's mortgage.
Court of Appeals affirmed the district court in FV-I,
Inc., v. Kallevig, No. 111, 235, 2015 WL 717776 (Kan.
App. 2015) (unpublished opinion) (Kallevig II)
holding FV-I did not have standing to pursue its claim
without establishing enforcement rights in the promissory
note as of the date of the filing, FV-I's mortgage was
unenforceable, and FV-I's mortgage lost its superior
priority to BOP's mortgages. FV-I petitions for review,
arguing standing does not have to be proved at the time of
filing and that a lack of standing should not result in its
mortgage losing its superior position.
agree with the Kallevig II panel that standing is
based on the party's enforcement and possession rights at
the time of filing. However, evidentiary rulings excluding
endorsements on the promissory note compel us to remand for a
rehearing regarding standing and the panel's priority
determination. We therefore reverse contrary rulings by the
district judge and the Court of Appeals, and we remand the
case to the district court for further proceedings.
and Procedural Background
September 16, 2005, Kermit and Constance Kallevig and GMAC
Bank entered into a note and mortgage concerning property in
Bucyrus. On June 15, 2011, the mortgage was assigned to FV-I
by Mortgage Electronic Registration Systems, Inc., (MERS) as
a nominee for GMAC Bank, its successors, and assigns. On June
24, 2011, FV-I filed a petition to foreclose the mortgage.
Attached to the petition was a copy of the mortgage and a
note with an undated stamp endorsement from GMAC Bank to
GMACB Asset Management Corp. FV-I indicated it had authority
to enforce the note and mortgage under K.S.A. 60-217.
named BOP as a party because BOP had three mortgages on the
same property that FV-I claimed were either subordinated by
agreement or otherwise junior: a mortgage recorded October
16, 2002, subordinated by agreement; a mortgage recorded
October 19, 2006; and a mortgage recorded September 28, 2007.
FV-I attached the subordination agreement to the petition.
filed an answer, a counterclaim against FV-I, and a
cross-claim against the Kallevigs. BOP acknowledged that it
held three mortgages on the property and that it had executed
a subordination agreement. BOP argued FV-I failed to state a
claim upon which relief could be granted and asked that the
district court establish that its mortgages had priority.
and BOP filed multiple motions back and forth. FV-I
consistently claimed the right to enforce the note by
possession and endorsement of the note. BOP challenged
whether FV-I had standing, whether FV-I's mortgage and
note had split, and whether FV-I had the ability to enforce
the note. FV-I subsequently claimed enforcement rights
through two additional means.
first was based on an allonge transferring the note to
FV-1-originally with GMACB-from Ally Bank, as successor in
interest to GMACB. FV-I indicated it did not know when the
allonge had been prepared. The second was the original note,
which included two additional endorsements that the note
attached to FV-I's petition did not have: the first was
without recourse from GMACB to Residential Funding Company,
LLC (Residential); and the second was an undated endorsement
in blank from Residential.
district court granted BOP's motion for summary judgment,
holding that FV-I lacked standing because it failed to
establish ownership of the note as of the date FV-I filed its
petition. The district court further held that FV-I's
mortgage and note had split, which rendered FV-I's
mortgage unenforceable and allowed BOP's mortgages to
jump ahead in priority.
appeal, a panel of the Court of Appeals reversed the order in
Kallevig I. The panel held that FV-I must establish
it was in possession of the note prior to filing its
petition, in order to establish holder status and a right to
enforce the note. Kallevig I, 2013 WL 2321198, at
*4. The panel also observed that there was no evidence the
note and mortgage had been split. 2013 WL 2321198, at *4. The
panel concluded that neither party was entitled to judgment
as a matter of law and reversed and remanded the case to
determine when FV-I took possession of the note. 2013 WL
2321198, at *5. Neither party filed a petition for review of
the Kallevig I decision.
remand, the parties agreed to the sale of the subject real
estate, and the sale proceeds were paid into escrow until a
priority determination could be made. At the October 8, 2013,
bench trial, the parties stipulated to the Kallevigs'
default on the note. FV-I claimed enforcement rights through
its status as holder of the original note and argued that the
interests had not been split and that its mortgage had
priority. BOP argued that there had been an "implied or
inferred" split of the mortgage and note, that
FV-I's inability to explain how it had acquired the note
was suspicious, and that the mortgage FV-I held was
"ineffectual and unenforceable" because FV-I could
not establish its enforcement rights. Regarding the two
additional endorsements on the original note, BOP argued
that, "if there was ever a presumption in their favor,
it seems to me they've got a lot of work to do with
regard to prov[ing] issues on authenticity or validity of
trial, Andy Chatfield testified for FV-I. He worked as an
asset manager for AMS Servicing, LLC, a servicing agent that
handled defaulted loans. AMS serviced the loans for FV-I and
acquired the servicing of the Kallevig loan in January 2012-6
months after the petition in this case was filed. Chatfield
was familiar with AMS' practices and procedures and was
authorized to testify on behalf of FV-I. FV-I's counsel
relied on Chatfield to lay the foundation for the original
note that was endorsed in blank. Chatfield testified that it
was the original note from the Kallevig's file, that to
his knowledge FV-I had acquired the loan in 2010, but that he
did not have any personal knowledge regarding the transfer of
the note to FV-I prior to January 2012 by GMAC Bank and
challenged the two additional endorsements on the note. FV-I
argued that signatures were presumed valid and that a
challenge to the signature was an affirmative defense, which
meant that BOP had the burden to prove the signatures were
not authentic. The district court sustained BOP's
objections to the foundation and hearsay of the two
additional endorsements, reasoning that FV-I needed to lay a
proper business record foundation for the endorsements in
order for them to be admitted. The district court admitted
the original note at trial without the last two endorsements,
which included the endorsement in blank.
journal entry of judgment, the district court relied on its
decision to exclude the two additional endorsements in
holding that FV-I failed to establish it had enforcement
rights in the note. Relying on Mortgage Electronic
Registration Systems v. Graham, 44 Kan.App.2d 547, Syl.
¶ 1, 247 P.3d 223 (2010), the district court also held
that FV-I failed to show it had standing to bring the suit
because it had not established holder status as of the day it
filed its petition. Relying on Ohio and Maine caselaw, the
district court held that the lack of standing could not be
cured by a post-filing assignment of the note to FV-I.
district court held that the note and mortgage had split,
that FV-I's mortgage was unenforceable, and that
BOP's mortgages were therefore superior. It denied
FV-I's petition, granted BOP judgment on its counterclaim
against FV-I, and granted BOP default judgment on its
cross-claim against the other defendants.
of the Court of Appeals affirmed the district court in
Kallevig II. The panel treated the primary issue as
whether the district judge erred in holding that FV-I lacked
standing. Kallevig II, 2015 WL 717776, at *4. The
panel cited MetLife Home Loans v. Hansen, 48
Kan.App.2d 213, 225, 286 P.3d 1150 (2012), for the
proposition that a "holder of a promissory note has
standing to enforce the terms of indebtedness, including the
right to foreclose on a mortgage that secures it." 2015
WL 717776, at *4. The panel noted that a "mortgage is
unenforceable when it is not held by the same entity that
holds the promissory note, " relying on our decision in
Landmark Nat'l Bank v. Kesler, 289 Kan. 528,
540-41, 216 P.3d 158 (2009) (recognizing the possibility of a
mortgage and note split). 2015 WL 717776, at *4.
panel held that FV-I had to establish enforcement rights in
the note as of the filing of the petition in order to have
standing to bring its mortgage foreclosure suit. Kallevig
II, 2015 WL 717776, at *4. The panel held that FV-I
lacked standing because it "produced no evidence that
the district court as the factfinder found credible and
reliable to show FV-I had possession or assignment of the
note when the foreclosure petition was filed." 2015 WL
717776, at *5. The panel therefore held that the district
court properly determined FV-I's mortgage had lost its
priority over BOP's mortgages. The panel held that
BOP's mortgages were superior because FV-I's failure
to establish enforcement rights in the note made the mortgage
unenforceable, and the unenforceability of the mortgage meant
there was no longer a mortgage for BOP's mortgages to be
subordinate to. 2015 WL 717776, at *6.
panel declined to address FV-I's challenges to the
district court's ruling excluding the two additional
endorsements and held that the district court's
"ultimate decision did not include FV-I's and
BOP's arguments over the note and mortgage split, [so] we
see no need to address the arguments on appeal." 2015 WL
717776, at *6.
panel also declined to consider whether, assuming FV-I could
not enforce the note, another party would have been able to
enforce the note because FV-I had not sought to join a
necessary party to the action. 2015 WL 717776, at *6. The
panel affirmed the district court's determination that
FV-I lacked standing to initiate this foreclosure action.
2015 WL 717776, at *7.
the district court and the Court of Appeals in Kallevig
I and Kallevig II treated this case as one that
turns on whether FV-I had standing to initiate the
foreclosure proceedings. On petition for review, FV-I first
argues that the district court and Court of Appeals erred in
requiring it to prove possession of the note and the
existence of enforcement rights in it at the time it filed
its petition in order to establish standing to pursue
mortgage foreclosure. FV-I alternatively argues that standing
could be established by its undisputed possession of the
mortgage prior to filing, even without possession of the
is the "right to make a legal claim or seek enforcement
of a duty or right." Gannon v. State, 298 Kan.
1107, 1122, 319 P.3d 1196 (2014). "The question of
standing is one of law over which this court's scope of
review is unlimited." 298 Kan. at 1122. 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).
burden to establish standing rests with the party asserting
it. Gannon, 298 Kan. at 1123. "[T]he nature of
that burden depends on the stage of the proceedings[, ]
because the elements of standing are not merely pleading
requirements. Each element must be proved in the same way as
any other matter and with the degree of evidence required at
. . . successive stages of the litigation." 298 Kan. at
1123 (citing Lujan v. Defenders of Wildlife, 504
U.S. 555, 561, 112 S.Ct. 2130, 119 L.Ed.2d 351
the pleading stage, general factual allegations of injury
resulting from the defendant's conduct may suffice, for
on a motion to dismiss we 'presum[e] that general
allegations embrace those specific facts that are necessary
to support the claim.' [Citation omitted.]"
Lujan, 504 U.S. at 561. "In response to a
summary judgment motion . . . the plaintiff can no longer
rest on such 'mere allegations, ' but must 'set
forth' by affidavit or other evidence 'specific
facts, ' . . . which for purposes of the summary judgment
will be taken to be true." 504 U.S. at 561. "[A]t
the final stage, those facts (if controverted) must be
'supported adequately by the evidence adduced at
trial.'" 504 U.S. at 561.
general, to have standing, a plaintiff must have a
"'sufficient stake in the outcome of an otherwise
justiciable controversy in order to obtain judicial
resolution of that controversy.'" Gannon,
298 Kan. at 1122 (quoting Moorehouse v. City of
Wichita, 259 Kan. 570, 574, 913 P.2d 172');">913 P.2d 172 ).
Kansas law, in order to establish standing, a plaintiff must
show that (1) he or she suffered a cognizable injury and (2)
there is a causal connection between the injury and the
challenged conduct." Solomon v. State, 303 Kan.
512, 521, 364 P.3d 536 (2015). A cognizable injury is
established by showing a "'personal interest in a
court's decision and that he or she personally suffers
some actual or threatened injury as a result of the
challenged conduct.'" 303 Kan. at 521 (quoting
Sierra Club v. Moser, 298 Kan. 22, 33, 310 P.3d 360');">310 P.3d 360
). Moreover, "[t]he injury must be particularized,
i.e., it must affect the plaintiff in a
'"'personal and individual
way.'"'" 298 Kan. at 1123.
to Foreclose Mortgage
mortgage is a conveyance or retention of an interest in real
property as security for performance of an obligation.
Restatement (Third) of Property (Mortgages) §1.1 (1997).
"Promissory notes and mortgages are contracts to which
the rules of ...