L. Alamos Nat'l Bank v. Velasquez

446 P.3d 1220

LOS ALAMOS NATIONAL BANK, Plaintiff-Appellee,

v.George P. VELASQUEZ, Defendant-Appellant.

NO. A-1-CA-35888

Court of Appeals of New Mexico.

Filing Date: April 25, 2019

Certiorari Denied, August 5, 2019, No. S-1-SC-37688

Scott & Kienzle, P.A., Duncan Scott, Albuquerque, NM, for Appellee

Jay Goodman & Associates Law Firm, P.C., Vanessa L. DeNiro, Santa Fe, NM, for Appellant

M. ZAMORA, Chief Judge {1} Defendant George P. Velasquez (Homeowner) appeals the district court’s order granting in rem summary judgment in favor of Plaintiff Los Alamos National Bank (LANB) in this mortgage foreclosure action. On appeal, Homeowner argues that the district court erred in granting summary judgment because LANB failed to establish that it had standing to enforce Homeowner’s note at the time it filed its complaint. Homeowner also argues that the district court erred by permitting LANB, as servicer of the loan, to enforce the note. We conclude LANB had standing to enforce the note, as holder and loan servicer, at the time the complaint for foreclosure was filed and therefore affirm. We need not address Homeowner’s remaining issue.

BACKGROUND

{2} The following facts are undisputed. In March 2007 Homeowner executed a promissory note in favor of LANB for $273,000, secured by a mortgage. A few years later, Homeowner entered into a home affordable modification agreement with LANB to avoid defaulting on the mortgage. In March 2011 Homeowner defaulted by failing to make payments on the note when due.

{3} On August 23, 2011, LANB filed a complaint for foreclosure against Homeowner. Attached to the complaint was an unindorsed note bearing a statement stamped on the top of the first page by "Title Guaranty & Ins. Co." certifying that it was a true and correct copy of the original note. LANB also attached a copy of Homeowner’s mortgage to the complaint.

{4} On February 5, 2012, the district court entered a default judgment in favor of LANB based on Homeowner’s failure to answer, and LANB subsequently filed a notice of sale. Shortly thereafter, and before the scheduled sale took place, Homeowner filed for voluntary Chapter 7 bankruptcy in the United States Bankruptcy Court. Within Homeowner’s bankruptcy proceedings and on his Schedule D (Creditors Holding Secured Claims), he listed LANB as a secured creditor based on its mortgage, which he valued at $300,000. On March 22, 2012, seven months after it filed its complaint, LANB deposited the original note, indorsed in blank (the indorsed note), with the district court. Absent from this note was the stamped statement from the title company certifying that it was a true and correct copy.

{5} On June 7, 2012, Homeowner filed a motion to set aside the default judgment, requesting proof that LANB was the proper party to foreclose on the mortgage at the time the complaint was filed. Homeowner argued that his failure to timely answer was excusable neglect under Rule 1-060(B)(1) NMRA and raised the defense of standing. Homeowner also attached a document printed from the Federal National Mortgage Association (Fannie Mae) website indicating that Fannie Mae owned Homeowner’s loan, and argued at the motion hearing that LANB had "some explaining to do about where the note went" and how it came to "get [the note] back." The district court found that Homeowner satisfied the requirements of Rule 1-060(B), and set aside the default judgment. Homeowner then filed his answer and raised various affirmative defenses, only one of which is relevant to this appeal: LANB lacks standing to enforce the note and foreclose on the mortgage.

{6} LANB filed three motions for in rem summary judgment. In its first motion, LANB asserted it was entitled to summary judgment because it was the holder of the note and Homeowner was in default. The district court denied LANB’s first motion for in rem summary judgment because it did not address Homeowner’s affirmative defenses.

{7} In its second motion for in rem summary judgment, LANB included its responses to Homeowner’s affirmative defenses and maintained that it could enforce the note because it was the holder. In support of this second motion, LANB attached an affidavit from Jamie Gallegos (the Gallegos affidavit), a loss mitigation specialist at LANB. Gallegos detailed the procedural background of Homeowner’s loan and then stated, "[LANB] is the holder of the [n]ote and [m]ortgage." In LANB’s reply, it attached an affidavit by Jane Finch (the first Finch affidavit), the LANB loan administrative officer who placed the indorsement on the note. Finch explained that LANB began the process to obtain the original, indorsed note from Fannie Mae twenty-nine days before the complaint was filed. She stated that upon receiving it from Fannie Mae, LANB delivered the original indorsed note to LANB’s previous counsel, the Little Law Firm, on August 5, 2011, eighteen days before the foreclosure complaint was filed. Attached to the first Finch affidavit were three exhibits: (1) an e-mail from Jonathan LeDuc of LANB’s legal department requesting the original note memorializing Homeowner’s loan from Fannie Mae for judgment and foreclosure purposes; (2) a letter from Jonathan LeDuc to the Little Law Firm enclosing the original note for Homeowner’s loan; and (3) a Federal Express air bill receipt from Jonathan LeDuc to the Little Law Firm stamped received on August 5, 2011. LANB additionally argued in its reply that Homeowner is judicially estopped from challenging LANB’s standing because he acknowledged that LANB was a secured creditor during the course of his bankruptcy proceedings.

{8} At the hearing on LANB’s second motion for in rem summary judgment, Homeowner argued:

Opposing counsel states that he has evidence that [LANB] held the note at the time [of] the filing of the complaint, but I don’t see that evidence. The exhibit, which I would object to, to admit into court, is hearsay. And it is basically just a cover letter stating that it has the original note, but a copy of the note is not even attached to it.

LANB did not respond to Homeowner’s hearsay claim, but instead focused most of its argument on Fannie Mae’s interest in the loan. At the conclusion of the January 25, 2016 hearing, the district court ordered:

[Our New Mexico case law requires that LANB] show it was the holder at the time it filed its complaint, which can be done by all kinds of evidence, including a person who has first-hand knowledge, including copies of business records that would show that that is the case. So I’m not going to preclude the bank from relying on evidence, such as Ms. Finch’s affidavit, in conjunction with the business records, that would show the Federal[ ]Expressing of the original note to the law firm at the time of the filing of the complaint.

Nevertheless, the district court denied the second motion for in rem summary judgment because it found that Homeowner had offered evidence that Fannie Mae, at least at some point in time, had an interest in the note, and therefore summary judgment was not appropriate until evidence was submitted that Fannie Mae no longer had an interest in the note.

{9} In LANB’s third motion for in rem summary judgment, it clarified Fannie Mae’s role in the underlying transaction, explaining that Fannie Mae "owns" the mortgage loan and LANB is the "servicer" of the mortgage loan and attaching the affidavit of John Curcio, Assistant Vice President for Fannie Mae (the Curcio affidavit), substantiating this relationship. Attached to the Curcio affidavit was a loan detail from Fannie Mae’s Servicer & Investor Reporting platform, providing information regarding mortgage loans acquired and owned by Fannie Mae. Curcio explained that the loan detail reflects the acquisition and history of Homeowner’s loan, establishing that Fannie Mae owns the mortgage in the present case and that LANB is the loan servicer. Nevertheless, LANB argued, it had standing to enforce the note based on its status as the servicer of the mortgage and as the holder of the note. In response, Homeowner again contended that the note and mortgage cannot properly be enforced by LANB because it is not the "true owner" of the note and therefore does not have authority to enforce the note. Notably, Homeowner did not dispute any of the material facts set forth in LANB’s second motion for in rem summary judgment and reply, and the facts were further incorporated by reference into LANB’s third in rem motion for summary judgment. In LANB’s reply, it attached a second affidavit by Finch (the second Finch affidavit), this time explaining the procedures followed by LANB in servicing Fannie Mae loans. According to the second Finch affidavit, immediately following the closing, the title company sends LANB a pre-closing copy of the original note, which is marked as a true and correct copy of the original. After and apart from the closing, the title company also delivers the original note to LANB. Upon LANB’s receipt of Homeowner’s original signed note in this case, Finch personally indorsed it, and recalls doing so within approximately thirty days or so of the closing, a time period consistent with her typical practice. Therefore, Finch explained, the indorsed note is not stamped by the title company because it is the original, not a copy. LANB also cited to an American Bar Association article, Dale Whitman, The "Person Entitled to Enforce": Lessons Learned from BAC Home Loans Servicing v. Kolenich, https://www.americanbar.org/content/dam/aba/publishing/rpte_ereport/2012/6_december/rp_articles.pdf, to explain the working arrangement between Fannie Mae and LANB and to refute Homeowner’s argument that he could be subject to multiple lawsuits. See id. (stating that at the time of foreclosure "Fannie Mae normally delivers possession of the note to its servicer becoming the holder or [person entitled to enforce], while Fannie Mae remains the owner, and will have the right to the proceeds of foreclosure").

{10} The district court...