Bank of America v. Inda

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No. 107,999

IN THE COURT OF APPEALS OF THE STATE OF KANSAS

BANK OF AMERICA, N.A.,
Successor by merger to
BAC HOME LOANS SERVICING, L.P.,
Appellee,

v.

DENNIS O. INDA,
Appellant.


SYLLABUS BY THE COURT

1.
A timely posttrial motion stops the appeal time from running.

2.
A motion to reconsider is generally treated as a motion to alter or amend the
judgment under K.S.A. 2012 Supp. 60-259(f), which may extend the time for appeal.

3.
The content of the motion, not the heading, determines the type of motion.
Moreover, pro se motions are to be liberally construed.

4.
An issue not briefed by an appellant is deemed waived and abandoned.

5.
When the pleadings, depositions, answers to interrogatories and admissions on
file, together with the affidavits, show that there is no genuine issue as to any material
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fact and that the moving party is entitled to judgment as a matter of law, summary
judgment is appropriate. The trial court is required to resolve all facts and inferences
which may reasonably be drawn from the evidence in favor of the party against whom the
ruling is sought. On appeal, the same rules apply; summary judgment must be denied if
reasonable minds could differ as to the conclusions drawn from the evidence.

6.
The main purpose of a mortgage is to insure the payment of the debt for which it
stands as security, and foreclosure is allowed when necessary to carry out that objective.

7.
To grant summary judgment in a mortgage foreclosure action, the trial court must
find undisputed evidence in the record that the defendant signed a promissory note
secured by a mortgage, that the plaintiff is the valid holder of the note and the mortgage,
and that the defendant has defaulted on the note.

8.
Under K.S.A. 84-1-101 et seq., a note is a negotiable instrument which is subject
to Article 3 of the Kansas Uniform Commercial Code, K.S.A. 2012 Supp. 84-3-104.

9.
Under K.S.A. 84-3-301, a person entitled to enforce an instrument can be any of
the following: (a) the holder of the instrument, (b) a nonholder in possession of the
instrument who has the rights of a holder, or (c) a person not in possession of the
instrument who is entitled to enforce the instrument under K.S.A. 84-3-309 or K.S.A. 84-
3-418(d).

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10.
Under K.S.A. 2012 Supp. 84-1-201(21)(A), a holder means a person who is in
possession of a negotiable instrument that is payable either to the bearer or to an
identified person who is the person in possession.

11.
A person who is a holder remains a holder although that person has made an
assignment of a beneficial interest therein.

12.
The payee in possession of a note is the holder and may bring suit on the note even
though the payee had already assigned the note as the holder of an instrument regardless
of whether the payee is the owner and may enforce payment in the payee's own name.

13.
Under K.S.A. 84-3-205(b), a note can be endorsed in blank, which means that the
instrument becomes payable to the bearer and may be negotiated by transfer of
possession alone until specifically endorsed.

14.
The elements required to sustain an action for fraud include: (1) an untrue
statement of fact, (2) known to be untrue by the party making it, (3) made with the intent
to deceive or with reckless disregard for the truth, (4) upon which another party
justifiably relies, and (5) the other party acts to his or her detriment.

15.
Although the existence of fraud is normally a question of fact, when a plaintiff
fails to present any evidence of an essential element of his or her claim in responding to a
motion for summary judgment, there can be no genuine issue as to any material fact
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because a complete failure of proof concerning an essential element of the nonmoving
party's case necessarily renders all other facts immaterial.

16.
The doctrine of clean hands is applied sparingly and only to willful conduct which
is fraudulent, illegal, or unconscionable and that shocks the moral sensibilities of the
judge.

17.
The purpose of Rule 141 (2012 Kan. Ct. R. Annot 247) is to identify what facts
are or are not controverted or on what evidence the parties rely. A technical violation of
Rule 141 does not automatically result in judgment for the opposing party.

Appeal from Johnson District Court; GERALD T. ELLIOTT, judge. Opinion filed March 8, 2013.
Affirmed.

Dennis O. Inda, appellant pro se.

Robert E. Lastelic, of South & Associates, P.C., of Overland Park, for appellee.

Before ARNOLD-BURGER, P.J., GREEN, J., and HEBERT, S.J.

GREEN, J.: Bank of America, the mortgage note holder, brought an action to
foreclose on Dennis Inda's mortgage after he defaulted on his loan. The trial court granted
Bank of America's motion for summary judgment, finding that Bank of America was the
holder of the note (Note) and the mortgage (Mortgage) and that Inda had defaulted on the
loan. We affirm.

On March 30, 2007, Inda executed and delivered the Note to Pulaski Bank
(Pulaski), promising to pay Pulaski the principal sum of $244,000 plus interest in
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monthly installments. As security for the Note, Inda and his wife, Jacque Gichuki, signed
the Mortgage on their Olathe home, which was filed with the Johnson County register of
deeds on April 3, 2007.

The Mortgage defines the Mortgage Electronic Registration Systems, Inc.
(MERS), a separate corporation, as the mortgagee and states that MERS is acting "solely
as nominee" for Pulaski and Pulaski's successors and assigns.

The Note was endorsed by Pulaski to Countrywide Bank, N.A. Countrywide
Bank, FSB, formerly known as Countrywide Bank N.A., endorsed the Note to
Countrywide Home Loans, Inc. Countrywide Home Loans, Inc., then endorsed the Note
"in blank."

Inda challenged Bank of America's standing to foreclose.

Inda eventually defaulted on the Note, so on January 25, 2010, Bank of America
filed the foreclosure action which is the underlying subject matter of this case.

Inda challenged Bank of America's standing to foreclose arguing that Bank of
America was not the owner of the Note. Inda maintained that Bank of America was
simply the servicer of the Note and not the owner; therefore, it did not have standing to
foreclose. Inda further contended that Bank of America committed fraud by alleging that
it was the owner of the Note at times while also alleging that it was the servicer of the
Note.

Bank of America primarily responded that it had standing to foreclose based
simply on its holding of both the Note and the Mortgage. To show its interest in the Note,
Bank of America provided the trial court with the original Note which contained the three
previous endorsements showing that the last endorsement was "in blank." Moreover, to
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show its interest in the Mortgage, Bank of America provided the trial court with the
assignment of the Mortgage to BAC Home Loans Servicing, LP., as well as the
Certificate of Merger of BAC Home Loans Servicing, LP., into Bank of America. Bank
of America also informed the trial court that it had sold its beneficial interest in the Note
to Freddie Mac, making Freddie Mac the owner of the Note, but that Bank of America
continued to possess the Note.

The trial court held Bank of America had standing to foreclose.

Following a hearing on the parties' competing motions for summary judgment,
during which the sole issue argued was Bank of America's standing to foreclose, the trial
court entered judgment in Bank of America's favor. In support, the trial court reasoned
that Bank of America was the holder of the Note and it therefore had the authority to
enforce the Note and the Mortgage. Upon the trial court's denial of his motion to set aside
judgment, Inda filed this pro se appeal.

Before we can address Inda's arguments, we need to address a jurisdiction
argument raised by Bank of America. Bank of America argues that we do not have
jurisdiction to consider whether the trial court erred in granting summary judgment in
favor of Bank of America because Inda did not timely appeal that judgment. Bank of
America notes that under K.S.A. 2012 Supp. 60-2103(a) an appeal must be made within
30 days after the judgment, unless there was a posttrial motion filed that tolled the time to
appeal. Bank of America contends that Inda's posttrial motion was not one of the motions
that extended the time to appeal and, therefore, Inda failed to timely appeal the grant of
summary judgment in favor of Bank of America. Bank of America maintains that the
only judgment properly before this court is the judgment denying Inda's posttrial motion
filed under K.S.A. 2012 Supp. 60-260.

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As Bank of America properly states, a timely posttrial motion stops the appeal
time from running. See State ex rel. Secretary of SRS v. Mayfield, 25 Kan. App. 2d 452,
Syl. ¶ 4, 966 P.2d 85 (1998). The time starts running again in its entirety on the date of
entry of the order ruling upon the posttrial motion. K.S.A. 2012 Supp. 60-2103(a). K.S.A.
2012 Supp. 60-2103(a) lists the only timely posttrial motions that extend the time for
appeal: (1) renewal of motion for judgment as a matter of law under K.S.A. 2012 Supp.
60-250(b); (2) motion to amend or make additional findings of fact under K.S.A. 2012
Supp. 60-252(b); (3) motion for new trial other than motions for new trial based on newly
discovered evidence under K.S.A. 2012 Supp. 60-259; and (4) motions to alter or amend
the judgment under K.S.A. 2012 Supp. 60-259(f). Motions to reconsider are generally
treated as motions to alter or amend the judgment under K.S.A. 2012 Supp. 60-259(f).
Exploration Place, Inc. v. Midwest Drywall Co., 277 Kan. 898, 900, 89 P.3d 536 (2004).
Moreover, a K.S.A. 2012 Supp. 60-260 motion for relief from judgment does not extend
the time for appeal. Giles v. Russell, 222 Kan. 629, 632, 567 P.2d 845 (1977); see State
ex rel. Secretary of SRS v. Keck, 266 Kan. 305, 969 P.2d 841 (1998).

In this case, Inda filed a posttrial motion entitled "Defendant's Motion to Set Aside
Summary Judgment." The motion states that Inda seeks relief from judgment under
K.S.A. 2012 Supp. 60-260. As stated earlier, K.S.A. 2012 Supp. 60-260 does not extend
the time for appeal. Nevertheless, the content of the motion, not the heading, determines
the type of motion, and pro se motions are to be liberally construed. See State v. Kelly,
291 Kan. 563, 565, 244 P.3d 639 (2010); In re Marriage of Hansen, 18 Kan. App. 2d
712, 714, 858 P.2d 1240 (1993).

In denying the motion, the trial judge stated:

"[T]hese are not the kind of arguments that are available to a party under K.S.A. 60-260.
Which is a motion to set aside a judgment, or relief from judgment or order, for some
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specific reasons. None of those reasons are advanced to the Court today. So if I am to
take the—treat this really as a K.S.A. 60-260 motion, there's really no basis for it.
. . . .
"I looked at whether or not this might be some sort of a reconsideration motion
under K.S.A. 60-259, thinking that perhaps we don't get too hung up over what people
call their papers. We try to look at what they're really trying to accomplish and see if that
provides them an opportunity for relief.
"I don't really think this is a motion under [K.S.A. 60-]259. I think you're
really—what you're really trying to do is, you're really trying to bring to my attention
some points that you think are error in the decision that I made on the summary judgment
motion. . . .
"The Court feels, in this instance, however, that what you believe to be errors,
were not errors. The Court is satisfied that it made the correct ruling on the points that
you have raised, and that your motion for relief should be denied. And is denied."

Considering the motion and the comments made by the trial judge, we determine
that under K.S.A. 2012 Supp. 60-260, Inda's motion could be considered a motion to
reconsider or motion to alter or amend the judgment. In his motion, Inda does not raise
any new arguments; he simply reiterates his summary judgment arguments and argues
that the trial court erred in granting summary judgment. Thus, because this motion fits
within one of the exceptions that extends the time to appeal, Inda's notice of appeal was
timely filed. Also, although Inda filed his notice of appeal 8 days before the trial court
filed the order denying his posttrial motion, but after the trial court announced its
judgment on the order, his notice of appeal is still timely under Kansas Supreme Court
Rule 2.03 (2012 Kan. Ct. R. Annot. 11).

As a result, the issues of granting summary judgment in favor of Bank of America
and the denial of Inda's posttrial motion are both properly before this court. Nevertheless,
we will not address whether the trial court properly denied Inda's posttrial motion
because Inda has failed to brief this issue. An issue not briefed by an appellant is deemed
waived and abandoned. See State v. McCaslin, 291 Kan. 697, 709, 245 P.3d 1030 (2011).
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Did the trial court err in granting summary judgment in favor of Bank of America?

Standard of review

The standards for granting summary judgment are well known. When the
pleadings, depositions, answers to interrogatories, and admissions on file, together with
the affidavits, show that there is no genuine issue as to any material fact and that the
moving party is entitled to judgment as a matter of law, summary judgment is
appropriate. The trial court is required to resolve all facts and inferences which may
reasonably be drawn from the evidence in favor of the party against whom the ruling is
sought. On appeal, the same rules apply; summary judgment must be denied if reasonable
minds could differ as to the conclusions drawn from the evidence. Osterhaus v. Toth, 291
Kan. 759, 768, 249 P.3d 888 (2011). In addition, to the extent this case involves a
jurisdictional question, that being whether Bank of America has standing to bring this
foreclosure action, our review is unlimited. Board of Sumner County Comm'rs v. Bremby,
286 Kan. 745, Syl. ¶ 1, 189 P.3d 494 (2008).

The elements of a mortgage foreclosure action

"The main purpose of a mortgage is to insure the payment of the debt for which
[it] stands as security; and foreclosure is allowed when necessary to carry out that
objective." United States v. Loosley, 551 P.2d 506, 508 (Utah 1976). Therefore, in order
to grant summary judgment in a mortgage foreclosure action, the trial court must find
undisputed evidence in the record that the defendant signed a promissory note secured by
a mortgage, that the plaintiff is the valid holder of the note and the mortgage, and that the
defendant has defaulted on the note. See Cornerstone Homes v. Skinner, 44 Kan. App. 2d
88, 97-98, 235 P.3d 494 (2010). So in this case, if the pleadings, depositions, answers to
interrogatories, and admissions on file, together with any affidavits, show that there is no
genuine issue as to any material fact regarding (1) Bank of America's beneficial interest
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in the Note signed by Inda; (2) Bank of America's beneficial interest in the Mortgage
signed by Inda and his wife to secure the Note; and (3) a default on the Note by Inda,
then Bank of America is entitled to judgment as a matter of law.

It is undisputed that Inda is in default on the Note

The third condition, or element, for foreclosure is met on the undisputed record
facts. Inda is in default on the Note. Although Inda denied the later default, he admitted
that the last payment on the Note was made on November 2, 2009, which constituted a
default. This admission by Inda is sufficient to show that Inda was in default on the Note.

The issue centers on Bank of America's interest in the Note and the Mortgage

The main issue here is whether the record supports the trial court's finding that
Bank of America was the undisputable holder of the Note and therefore summary
judgment was proper on the issue of its standing to foreclose on the Mortgage as
collateral for the Note.

Inda argues that Bank of America is merely the servicer of the Note and is not the
actual owner of the Note or the holder of the Note. Inda maintains that Bank of America
is not the beneficial owner of the Note because it sold its interest in the Note to Freddie
Mac and thus is now merely a servicer without standing to bring a foreclosure action.
Inda further argues that Bank of America has not produced any evidence that Freddie
Mac has authorized Bank of America to act on its behalf in seeking foreclosure.

On the other hand, Bank of America contends that it is the holder of the Note.
Bank of America admitted that although Freddie Mac owned the Note, Bank of America
was in possession of the Note and was therefore the holder of the Note.

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In Kansas, a note is a negotiable instrument which is subject to Article 3 of the
Kansas Uniform Commercial Code (UCC), K.S.A. 84-1-101 et seq. K.S.A. 2012 Supp.
84-3-104. Under K.S.A. 84-3-301, a person entitled to enforce an instrument can be any
of the following:

"(a) the holder of the instrument, (b) a nonholder in possession of the instrument who has
the rights of a holder, or (c) a person not in possession of the instrument who is entitled to
enforce the instrument under K.S.A. 84-3-309 or 84-3-418(d). A person may be a person
entitled to enforce the instrument even though the person is not the owner of the
instrument or is in wrongful possession of the instrument." (Emphasis added.)

"'Holder'" means a "person in possession of a negotiable instrument that is payable either
to bearer or to an identified person [who] is the person in possession." K.S.A. 2012 Supp.
84-1-201(21)(A).

"'[A] person who is a holder remains a holder although that person has made an
assignment of a beneficial interest therein.' [Citation omitted.] 'Consequently, the payee
in possession of a note is the holder and may bring suit on the note even though the payee
had already assigned the note as the holder of an instrument whether or not he is the
owner may . . . enforce payment in his own name. ' [Citation omitted.]" In re Martinez,
455 B.R. 755, 763 (Bankr. D. Kan. 2011).

Further, under K.S.A. 84-3-205(b), like in this case, a note can be endorsed "in blank,"
which means that the instrument becomes payable to the bearer and may be negotiated by
transfer of possession alone until specifically endorsed.

Based on these provisions of the UCC, Bank of America was entitled to enforce
the Note against Inda upon a showing (1) that the Note was made payable to Bank of
America or was endorsed in blank and (2) that Bank of America remained in possession
of the note.

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In this case, Inda signed a promissory note to Pulaski, secured by a real estate
mortgage that he and his wife both gave to MERS as nominee of Pulaski. Documents
submitted to the court show that the Note was thereafter endorsed to Countrywide Bank,
N.A.; Countrywide Bank, FSB, formerly known as Countrywide Bank, N.A., endorsed
the Note to Countrywide Home Loans, Inc.; and Countrywide Home Loans, Inc.,
endorsed the Note "in blank." We also note that Bank of America presented the original
Note to the trial court.

As a result, Bank of America is the holder of the Note because Bank of America
presented the original Note to the trial court, which showed the three previous
endorsements, with the last endorsement made "in blank." Moreover, as stated earlier, a
person may be entitled to enforce an instrument even though the person is not the owner
of the instrument. K.S.A. 84-3-301; see also In re Martinez, 455 B.R. at 763 (the fact that
a holder is not the owner who is entitled to keep the proceeds for his or her own personal
use does not affect the holder's right as holder to sue on the instrument). Therefore, Bank
of America had the authority under the UCC to enforce the Note even though it had sold
the beneficial interest in the Note to Freddie Mac. This was true regardless of whether
Freddie Mac expressly authorized Bank of America to enforce the Note.

The next issue we must determine is whether Bank of America had the authority to
enforce the Mortgage. Under Kansas mortgage law, because Bank of America was the
holder of the Note, Bank of America was also the holder of the Mortgage. Generally, the
mortgage follows the note. See Kurtz v. Sponable, 6 Kan. 395, 397 (1870) (stating that
"[u]nder our laws, the mortgage is but appurtenant to the debt; a mere security; and,
under ordinary circumstances, whoever owns the debt, owns the mortgage"); see K.S.A.
2012 Supp. 84-9-203(g). Therefore, a perfected claim to the note is equally perfected as
to the mortgage. See Federal Land Bank of Wichita v. Krug, 253 Kan. 307, 314, 856 P.2d
111 (1993).

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In this case, the Mortgage stated that it was held by MERS "solely as nominee" for
Pulaski and Pulaski's successors and assigns. Bank of America furnished the court with
an assignment of the Mortgage to BAC Home Loans Servicing, LP., as well as the
Certificate of Merger of BAC Home Loans Servicing, LP., into Bank of America. Thus,
Bank of America has sufficiently proven that it was the successor to the Mortgage;
therefore, it had the authority to enforce the Mortgage.

Thus, because the record conclusively establishes that at all times Bank of
America was the holder of the Note executed by Inda, that Bank of America was the
successor to the Mortgage, and that Inda was in default on the Note, Bank of America
was entitled to summary judgment on its mortgage foreclosure action as a matter of law.

Inda's remaining claims

In addition to the appropriateness of the trial court's granting of summary
judgment, Inda raised several other issues.

Fraud

Next, Inda argued that Bank of America committed fraud by asserting that it was
the holder of the Note. Inda contends that by claiming to be the holder of the Note, Bank
of America is in contravention in its agreement with the owner, Freddie Mac.

The elements required to sustain an action for fraud include: "'"[1] an untrue
statement of fact, [2] known to be untrue by the party making it, [3] made with the intent
to deceive or with reckless disregard for the truth, [4] upon which another party
justifiably relies and [5] acts to his or her detriment."'" Mortgage Electronics Registration
Systems v. Graham, 44 Kan. App. 2d 547, 555, 247 P.3d 223 (2010) (quoting Bomhoff v.
14

Nelnet Loan Services, Inc., 279 Kan. 415, 422, 109 P.3d 1241 [2005]; PIK Civ. 4th
127.40).

Although the existence of fraud is normally a question of fact, when a plaintiff
fails to present any evidence of an essential element of his or her claim in responding to
motion for summary judgment, "'there can be "no genuine issue as to any material fact,"
since a complete failure of proof concerning an essential element of the nonmoving
party's case necessarily renders all other facts immaterial.'" Crooks v. Greene, 12 Kan.
App. 2d 62, 64-65, 736 P.2d 78 (1987) (quoting Celotex Corp. v. Catrett, 477 U.S. 317,
323, 106 S. Ct. 2548, 91 L. Ed. 2d 265 [1986]).

The untrue statement of fact that Inda relies on is the statement that Bank of
America is the holder of the Note. As explained earlier, we found this statement to be
true; therefore, Inda's fraud argument fails on the first element. When a plaintiff lacks
evidence to establish an essential element of his or her claim, summary judgment is
appropriate. Graham, 44 Kan. App. 2d at 555. Therefore, the trial court properly granted
summary judgment on Inda's fraud claim.

Deceptive acts and practices

Additionally, in Inda's brief, he contends that Bank of America engaged in
deceptive acts or practices, but he failed to present any facts or cite any authority to
support the allegation. Instead, Inda broadly suggested that "[t]he consent order and the
servicing guides, outline several practices that the plaintiff [Bank of America] should
have adhered to." Again, issues not briefed are deemed abandoned. See McCaslin, 291
Kan. at 709.

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Clean hands

Inda also contends that the equitable doctrine of clean hands bars Bank of
America's motion for summary judgment concerning its foreclosure action. Inda
maintains that he was enticed into entering into a loan modification and was told to stop
making mortgage payments until his modification was either approved or denied. The
doctrine of "clean hands" is applied sparingly and only to "willful conduct which is
fraudulent, illegal or unconscionable" that "shock[s] the moral sensibilities of the judge."
Green v. Higgins, 217 Kan. 217, 221, 535 P.2d 446 (1975). Here, there is no evidence
that Bank of America's conduct was fraudulent, illegal, or unconscionable. Thus, the
doctrine of clean hands does not apply here.

Kansas Supreme Court Rule 141

Finally, Inda argues that the trial court erred in granting summary judgment in
favor of Bank of America because Bank of America's motion did not comply with
Kansas Supreme Court Rule 141 (2012 Kan. Ct. R. Annot 247). Bank of America
concedes that the trial court stated that both parties failed to fully comply with Rule 141.
Bank of America notes that the trial court stated that it would hear the motions
nevertheless. Bank of America further contends that it substantially complied with Rule
141, and any failure to comply with Rule 141 constituted harmless error; therefore, the
trial court's grant of summary judgment in Bank of America's favor should be upheld.

During the hearing on Inda's motion for summary judgment, the trial judge stated:

"In some of your [Bank of America's] papers, both in the motion and in your reply to Mr.
Inda's motion for summary judgment, you also failed to comply with Rule 141, and failed
to set out clearly, make the statement that they were statements were controverted, and
16

when controverted, failed to set out the facts as you assert them to be with precise
reference.

"So both of you have failed to comply with Rule 141 of the Supreme Court. . .
And a way to deal with . . . these motions . . . would have been simply to cite that rule
and to deny both of your motions. . . .
"But I chose not to do that . . . . I prefer to hear your arguments and rule on the
substance of your arguments in this particular case."

As recognized in McCullough v. Bethany Med. Center, 235 Kan. 732, 736, 683
P.2d 1258 (1984), the purpose of Rule 141 is to identify "what facts are or are not
controverted" or "on what evidence the parties rely." Our Supreme Court has stated that a
technical violation of Rule 141 does not automatically result in judgment for the
opposing party. See City of Arkansas City v. Bruton, 284 Kan. 815, 836-37, 166 P.3d 992
(2007). Also as held in Calver v. Hinson, 267 Kan. 369, 377-78, 982 P.2d 970 (1999),
substantial compliance with Rule 141 can be enough.

Inda would have this court reverse the entry of summary judgment on the ground
that the trial court considered Bank of America's motion for summary judgment despite
its having failed to comply with Rule 141, irrespective of harm or substantial compliance.
Here, clearly the trial court found that Bank of America substantially complied with Rule
141. After reviewing the motions, we hold that any Rule 141 violations here did not
prevent the trial court from granting summary judgment in favor of Bank of America.

Affirmed.