Citibank, N.A. v. Martinez

CITIBANK, N.A., AS TRUSTEE FOR THECERTIFICATEHOLDERS OF STRUCTURED ASSETMORTGAGE INVESTMENTS II INC., BEAR STERNSALT-A TRUST, MORTGAGE PASS-THROUGHCERTIFICATES, SERIES 2007-1, Plaintiff-Appellee, v. MARGARET H. MARTINEZ, Defendant-Appellant,andMORTGAGE ELECTRONIC REGISTRATIONSYSTEMS, INC., AS NOMINEE FOR MEGASTARFINANCIAL CORP., Defendant.

NO. 33,945

COURT OF APPEALS OF THE STATE OF NEW MEXICO

April 19, 2016

This memorandum opinion was not selected for publication in the New Mexico Appellate Reports. Please see Rule 12-405 NMRA for restrictions on the citation of unpublished memorandum opinions. Please also note that this electronic memorandum opinion may contain computer-generated errors or other deviations from the official paper version filed by the Court of Appeals and does not include the filing date.

APPEAL FROM THE DISTRICT COURT OF VALENCIA COUNTY

Violet C. Otero, District Judge

Holland & Hart LLP

Larry J. Montaño

Santa Fe, NM

for Appellee

Cravens Law LLC

Richard H. Cravens, IV

Albuquerque, NM

for Appellant

MEMORANDUM OPINION

KENNEDY, Judge.

{1} Defendant Margaret H. Martinez appeals from the district court's grant of summary judgment and denial of Defendant's motion for reconsideration of summary judgment, entered on June 18, 2014, and June 20, 2014, respectively. On appeal, Defendant raises three arguments, contending that Plaintiff Citibank, N.A., as Trustee for the Certificateholders of Structured Asset Mortgage Investments II Inc., Bear Stearns Alt-A Trust, Mortgage Pass-Through Certificates, Series 2007-1, does not have standing to enforce the note and mortgage at issue in the present case. With regard to Defendant's argument that Plaintiff is not the owner of the right to enforce the note and is not the real party in interest, we hold that Plaintiff is the holder and entitled to enforce the note pursuant to the Uniform Commercial Code (UCC) and Rule 1-025(C) NMRA, permitting the original party to continue an action absent direction from the court to substitute or join a transferee of interest. With regard to Defendant's argument that less than the entire instrument was transferred to Plaintiff, so Plaintiff cannot enforce the note and mortgage, we hold that the undisputed facts show that the note was not split and that the note and mortgage were transferred to the same party in each instance, rendering Defendant's legal argument moot. Finally, with regard to Defendant's argument that, based on policy considerations, Plaintiffshould not be permitted to enforce the note and mortgage because it does not own the note and because the entire instrument has not been transferred to Plaintiff , we refer Defendant to our conclusions on the first two issues raised. Plaintiff is the holder of both the note and mortgage: As such it can pursue foreclosure against Defendant. We therefore affirm the district court's order granting summary judgment and order denying Defendant's motion for reconsideration.

BACKGROUND

{2} On or about October 2, 2006, Defendant signed a promissory note payable to the order of original lender Megastar Financial Corporation (Megastar). To secure the note, on October 3, 2006, Defendant signed a mortgage identifying Megastar as lender and Mortgage Electronic Registration Systems, Inc., (MERS) as nominee for lender, which mortgage pledged the property at issue in this case (the Property) as collateral.

{3} In July 2012, Plaintiff filed its complaint in the Thirteenth Judicial District Court seeking foreclosure on the Property. In its complaint, Plaintiff alleged that it was "entitled to enforce the [n]ote and [m]ortgage." The complaint included as an attachment a copy of the note, indorsed by Megastar in blank. The complaint also included as an attachment a copy of the assignment of mortgage, whereby MERS, as nominee for Megastar, assigned the mortgage to Plaintiff.

{4} On February 27, 2013, counsel for Plaintiff filed an affidavit of possession of original note, contending that counsel for Plaintiff is in possession of the original note that is the subject of the suit, attaching a true and correct copy of the original note as an exhibit to the affidavit. The copy attached to the affidavit matches the copyattached to the complaint. Thereafter, on April 16, 2013, Defendant filed an affidavit in support of answer to complaint for foreclosure, and on May 1, 2013, she filed her answer to the complaint, generally denying all allegations in the complaint.

{5} Plaintiff filed a motion for summary judgment, and Defendant filed a response. Defendant also filed a motion to dismiss for lack of standing, essentially arguing that Plaintiff does not have standing to enforce the note and mortgage because the indorsement does not name Plaintiff as payee and because the note and mortgage were improperly split since the note names Megastar and an unnamed transferee while the mortgage names MERS and Plaintiff as assignee. After a hearing, the district court granted summary judgment in favor of Plaintiff and denied Defendant's motion to dismiss. Defendant filed a motion for reconsideration, alleging that Bank of New York v. Romero, 2014-NMSC-007, 320 P.3d 1, is "new controlling law, which Defendant believes mandates the dismissal of this matter with prejudice." Thereafter, the district court entered summary judgment, default judgment (against MERS), an order for foreclosure sale, and an order denying Defendant's motion for reconsideration. Defendant appealed the summary judgment order and order denying her motion for reconsideration.

DISCUSSION

{6} On appeal, Defendant argues that the district court erred in granting summary judgment in favor of Plaintiff and denying Defendant's motion for reconsideration. Defendant renews her arguments that Plaintiff did not have standing to bring theforeclosure action, the district court lacked jurisdiction to hear the case, and the judgment is therefore void.

Standard of Review

{7} "We review the district court's decision to grant summary judgment de novo." Phoenix Funding, LLC v. Aurora Loan Servs., LLC, 2016-NMCA-010, ¶ 7, 365 P.3d 8 (internal quotation marks and citation omitted), cert. granted, 2016-NMCERT-001, ___P.3d ___ (No. 35,512, Jan. 19, 2016). "Summary judgment is appropriate where the facts are undisputed, and the movant is entitled to judgment as a matter of law." Id. (internal quotation marks and citation omitted). "We review the facts and make all reasonable inferences from the record in favor of the nonmoving party." Id.

Plaintiff Had Standing to Foreclose

{8} Our standing calculus has changed, owing to the Supreme Court's recent opinion in Deutsche Bank National Trust Co. v. Johnston (Deutsche Bank II), ___-NMSC-___, ___ P.3d ___ ( No. 34,726, Mar. 3, 2016). Clarifying its position, it held that "standing is not a jurisdictional prerequisite[,]" but that standing is subject to prudential rules in mortgage foreclosure cases. Id. ¶¶ 10, 12. Lack of standing is accordingly no longer a jurisdictional defect, but analogous to a defendant's assertion that the plaintiff has failed to state a legal cause of action; an issue that cannot be waived—may be made—anytime prior to the completion of a trial on the merits. Id. ¶ 16; Rule 1-012(H)(2) NMRA.

{9} Deutsche Bank II, did not change Romero's determination that "[i]n order to establish standing to foreclose, [Plaintiff] must demonstrate that [it] had the right toenforce the note and the right to foreclose the mortgage at the time the foreclosure suit was filed." Phoenix Funding, LLC, 2016-NMCA-010, ¶ 15 (citing Romero, 2014-NMSC-007, ¶ 17).

{10} As this Court has recently reiterated, relying on principles from the UCC and our Supreme Court's opinion in Romero:

Under New Mexico's [UCC], a promissory note is a negotiable instrument, which can be enforced by (1) the holder of the instrument; (2) a holder who does not possess the instrument and has the rights of a holder; or (3) a person who does not possess the instrument, but is entitled to enforce it pursuant to certain provisions of the UCC. The holder of the instrument is the person in possession of a negotiable instrument that is payable either to bearer or to an identified person that is the person in possession. Accordingly, a third party must prove both physical possession and the right to enforcement through either a proper indorsement or a transfer by negotiation.

Phoenix Funding, LLC, 2016-NMCA-010, ¶ 16 (citing NMSA 1978, § 55-1-201(b)(21)(A) (2005); NMSA 1978, § 55-3-104(a), (b), (e) (1992); NMSA 1978, § 55-3-301 (1992), and Romero, 2014-NMSC-007, ¶¶ 20-21 (emphasis and internal quotation marks omitted)). In the present case, the note was originally payable to Megastar, not Plaintiff. Accordingly, we must determine whether Plaintiff provided sufficient evidence of how it became a holder of the note, either by indorsement or by a transfer. See Phoenix Funding, LLC, 2016-NMCA-010, ¶ 17.

{11} As set forth above, Plaintiff attached an indorsed copy of the note to the complaint, which matched the indorsed original of the note attached to Plaintiff's counsel's affidavit. The note included a blank indorsement. "A blank indorsement does not identify a person to whom the instrument is payable but instead makes itpayable to anyone who holds it as bearer paper." Deutsche Bank Nat'l Tr. Co. v. Beneficial N.M. Inc. (Deutsche Bank I), 2014-NMCA-090, ¶ 10, 335 P.3d 217 (alteration, internal quotation marks, and citation omitted), aff'd in part sub nom. Deutsche Bank II. Defendant argues that, because "[t]here is no [i]ndorsement specifically to [Plaintiff] and [Plaintiff] never signed the [i]ndorsement," Plaintiff "never possessed all of the rights in the mortgage [and n]ote" and that "at best[,] transfer is ambiguous from the [n]ote." We disagree.

{12} "Typically, the bearer of a note indorsed in blank is the holder of that note." Id.; see also Romero, 2014-NMSC-007, ¶ 26 ("[The] blank indorsement . . . established the [b]ank as a holder because the [b]ank [was] in possession of bearer...