PNC Mortg. v. Romero

377 P.3d 461

PNC MORTGAGE, a division of PNC Bank National Association, Successor by Merger to National City Mortgage, a division of National City Bank f/k/a National City Bank of Indiana, Plaintiff–Appellee,

v.Dana ROMERO and Eugene Romero, Defendants–Appellants.

No. 33,394.

Court of Appeals of New Mexico.

April 26, 2016.

Brownstein Hyatt Farber Schreck, LLP, Eric R. Burris, Nury H. Yoo, Albuquerque, NM, for Appellee.

Law Offices of Brian A. Thomas, P.C., Brian A. Thomas, Albuquerque, NM, for Appellants.

OPINION

SUTIN, Judge.

{1} Defendants–Appellants Dana and Eugene Romero (collectively, the Romeros) appeal from an award of summary judgment in favor of Plaintiff–Appellee PNC Mortgage, which orders that the foreclosure action against the Romeros proceed. The Romeros argue on appeal that there are genuine issues of material fact regarding PNC Mortgage's standing to enforce the Romeros' promissory note and to foreclose the mortgage that secured the note. Because we agree that there are outstanding genuine issues of material fact regarding PNC Mortgage's right to enforce the note at the time it filed its complaint and because PNC Mortgage failed to show that it timely possessed the Romero note as a bearer instrument, we reverse the district court's ruling and remand for further proceedings.

BACKGROUNDThe Note, the Mortgage, and the District Court Proceedings

{2} In May 2006, the Romeros signed a promissory note (the Romero note) evidencing a debt in the principal sum of $240,000 to National City Mortgage,¹ a division of National City Bank of Indiana. The Romero note was secured by a mortgage on the Romeros' home (the Romero mortgage). The Romeros made the mortgage payments up to and including January 1, 2010, but thereafter they went into default.

{3} In August 2010, Plaintiff PNC Mortgage, a division of PNC Bank, National Association, successor by merger to National City Mortgage (NCM), a division of National City Bank f/k/a National City Bank of Indiana (NCBI), filed a mortgage foreclosure complaint against the Romeros. PNC Mortgage attached to the complaint a copy of the unindorsed Romero note (hereinafter, the unindorsed note) that identified NCM, a division of NCBI, as the lender. PNC Mortgage also attached a copy of the Romero mortgage to the complaint. The complaint alleged that PNC Mortgage was “the holder of the [m]ortgage ... pursuant to a name change/merger with current holder of record.” Neither the complaint nor the attached documents alleged or showed any details of any successor status or merger. In September 2010, the Romeros filed an answer to the complaint wherein they alleged the affirmative defense of lack of standing to sue.

{4} In November 2012, PNC Mortgage filed a motion for summary judgment contending that it was entitled to judgment because it was the holder of and entitled to enforce the note and mortgage as stated in an affidavit of Courtney M. Ely (the Ely affidavit). As “a duly authorized agent of ... Plaintiff [,]” Ely stated that “PNC [Bank] is the legal holder” of the Romero note, “a true and correct copy of which is attached to the complaint” and the note was secured by the mortgage, “a true and correct copy of which is attached to the [c]omplaint[.]” In its motion, PNC Mortgage stated that its counsel was in possession of the original note and that it was the successor to the originator of the note and mortgage.

{5} In response to the motion for summary judgment, the Romeros asserted that material issues of fact existed precluding summary judgment. The Romeros denied that PNC Mortgage was the holder of the note and attacked the Ely affidavit because it lacked a statement that it was based on personal knowledge, it stated conclusions, and it was inadmissible hearsay. In addition, the Romeros stated that the note that was attached to the complaint lacked indorsements and was “order paper,” that there was no documentation of an assignment of the mortgage, and that nothing supported PNC Mortgage's claim to be the successor to the lender through merger, and therefore, PNC Mortgage lacked standing to foreclose. The Romeros also foreshadowed that PNC Mortgage may offer a “new and different” version of the note later in the proceedings and warned that allowing a second version would be unfair and create undue prejudice.

{6} Attached to their response to PNC Mortgage's motion was an affidavit by Eugene Romero addressing the Romeros' attempts to modify their loan and regarding an inquiry into the owner of their promissory note. Attached to the affidavit was a letter the Romeros received from PNC Mortgage to their qualified written request to PNC Mortgage under the Real Estate Settlement Procedures Act, 12 U.S.C. §§ 2601 to 2617 (2012). PNC Mortgage's letter dated September 27, 2012 (the QWR response letter), stated in relevant part that “[y]our loan is in a pool known as GSAA 2006–14 and the Trustee is Bank of America ...; however, PNC Mortgage is the servicer of your loan and you should continue to contact us for any concerns regarding your mortgage.” The QWR response letter also stated that “PNC Mortgage affirms the validity of the debt and requires repayment per the [n]ote and the [m]ortgage until all debt is paid in full.... PNC Mortgage will continue to service the above referenced loan, and any collection and foreclosure efforts will continue.” In addition, Mr. Romero attached a letter dated May 17, 2012, from PNC Mortgage that stated “[w]e service your loan on behalf of an investor or group of investors that has not given us the contractual authority to modify your loan under the Home Affordable Modification Program.”

{7} In response to the Romeros' contention that it lacked standing to enforce the note and to foreclose, PNC Mortgage submitted evidence in the form of certifications from the secretary of National City Bank/PNC Bank, National Association, and merger documentation from the Office of the Comptroller of the Currency. The documents showed that, “[e]ffective July 22, 2006, [NCBI] was acquired by [NCB] and National City Mortgage Co. became a wholly owned subsidiary of [NCB].” In 2008, “National City Mortgage Company merged into [NCB] and became a division of [NCB].” The certificate also noted that NCB, a wholly owned subsidiary of “National City Corporation,” became a wholly owned subsidiary in 2008 of The PNC Financial Services Group, Inc., when National City Corporation merged with and into The PNC Financial Services Group, Inc. Effective in 2009, NCB was merged into PNC Bank, National Association, which was a wholly owned subsidiary of PNC Bancorp, Inc., a wholly owned subsidiary of The PNC Financial Services Group, Inc. The result of this complicated showing, none of which is contested by the Romeros, is that, through succession by merger, NCB was merged into PNC Bank in November 2009.

{8} Also among PNC Mortgage's responsive summary judgment documents was a copy of the Romero note. But unlike the copy of the note that was attached to the complaint, this copy of the note contained two undated indorsements (hereinafter, the indorsed note). One indorsement unambiguously stated “Pay to the Order of National City Mortgage Co[.,] a Subsidiary of National City Bank of Indiana” and was signed by a document control specialist on behalf of “National City Mortgage[,] a division of National City Bank of Indiana[.]” The other indorsement, which appears below the foregoing indorsement, stated “Pay to the Order of [_________]” and was signed by the aforementioned document control specialist on behalf of “National City Mortgage Co[.,] a Subsidiary of National City Bank of Indiana.” Neither indorsement was dated and neither PNC Mortgage nor the Romeros offered specific evidence regarding the timing of the indorsements.

{9} Based on its reading of the merger documentation it submitted to support summary judgment, PNC Mortgage argued that it established a prima facie case that it was in the same position as the original lender, NCM, and it was in possession of the original note and was the holder of the note. PNC Mortgage also argued that it was entitled to enforce the note, as well as the mortgage, because it is “well-settled that the mortgage ‘follows' the note” as indicated in NMSA 1978, Section 55–9–203(g) (2005) of New Mexico's Uniform Commercial Code (UCC).

{10} The district court specifically determined that PNC Mortgage made a prima facie showing that it was the holder of the note and entitled to enforce it based on determinations that PNC Mortgage's predecessor in interest made the note a bearer instrument and that PNC Mortgage was in possession of the original note. See NMSA 1978, § 55–1–201(b)(21)(A) (2005) (stating that “ ‘holder’ means ... 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”). Thus, the district court agreed that PNC Mortgage had established standing to foreclose and granted summary judgment in favor of PNC Mortgage.

{11} After the district court granted summary judgment, and after the Romeros filed their docketing statement with this Court, the Romeros moved for relief under Rule 1–060(B) NMRA. In their motion, the Romeros argued that our Supreme Court's decision in Bank of New York v. Romero, 2014–NMSC–007, 320 P.3d 1, which was decided after the district court granted summary judgment in favor of PNC Mortgage, held that in order to show standing, a plaintiff is required “to demonstrate ... that it had standing to bring a foreclosure action at the time it filed suit.” Id. ¶ 17. The Romeros also argued that under Romero and Deutsche Bank National Trust Co. v. Beneficial New Mexico Inc. (Deutsche Bank I ), 2014–NMCA–090, 335 P.3d 217, affirmed in part sub nom. Deutsche Bank National Trust Co. v. Johnston (Deutsche Bank II ), 2016–NMSC–013, 369 P.3d 1046, PNC Mortgage was required to show timely ownership of both the note and the mortgage. According to the Romeros, because...