Deutsche Bank Nat'l Tr. Co. v. Villegas
| Decision Date | 10 May 2022 |
| Docket Number | A-1-CA-37822 |
| Parties | DEUTSCHE BANK NATIONAL TRUST COMPANY, AS INDENTURE TRUSTEE FOR NEW CENTURY HOME EQUITY LOAN TRUST 2005-2, Plaintiff-Appellee, v. BLANCA A. VILLEGAS, SUN CITY FINANCE, JOSE G. ORTIZ, and INEZ S. ORTIZ, Defendants, and HERMAN GARCIA and MARY HELEN GARCIA, Movants-Appellants. |
| Court | Court of Appeals of New Mexico |
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APPEAL FROM THE DISTRICT COURT OF DOÑA ANA COUNTY James T Martin, District Judge
Rose L. Brand & Associates, P.C.
Eraina M. Edwards
Albuquerque, NM
for Appellee
Martin & Lutz, P.C.
William L. Lutz
David P. Lutz
Las Cruces, NM
for Appellants
{¶1} Movants Herman and Mary Jane Garcia (collectively, the Garcias) appeal the district court's denial of their motion to set aside the judgment in a foreclosure action brought by Plaintiff Deutsche Bank against certain defendants not party to this appeal. Unpersuaded that the district court erred, we affirm.
{¶2} Deutsche Bank commenced the foreclosure action in June 2013 and recorded a notice of lis pendens shortly thereafter. Deutsche Bank sought to foreclose a mortgage executed by a borrower on property in Doña Ana County (the Property) and recorded in 2005, 2008, and 2010. Prior to the foreclosure action, the State of New Mexico had a lien on the Property for delinquent real property taxes as of January 1, 2011. Deutsche Bank, evidently unaware of this lien, did not name the State in the foreclosure action.
{¶3} In June 2015, the State sold the Property to the Garcias at a tax sale and executed a deed conveying to them all the prior owner's interest in the Property "subject only to perfected interests in the real property existing before the date the property lien arose." See NMSA 1978, § 7-38-70(B) (1982). In September 2015, an in rem default judgment and order for foreclosure sale was entered. The foreclosure sale was completed in February 2016, and the special master's deed, conveying the Property to Deutsche Bank, was recorded a few days later. The Garcias did not record their deed from the State until August 2016.
{¶4} Nearly two years later, after apparently having being named as defendants in a quiet title action by Deutsche Bank, the Garcias filed a Rule 1-060(B) NMRA motion to set aside the judgment and order for foreclosure sale. The Garcias' principal argument in support of their motion was that the judgment was void because Deutsche Bank failed to join the State as a necessary and indispensable party, under Rule 1-019(A) NMRA (). The district court denied the motion on two grounds-first, that the State was not a necessary and indispensable party; and second, that the Garcias did not timely "pursue their rights," despite having had constructive notice of the foreclosure action through the notice of lis pendens. The district court additionally ruled that Deutsche Bank was not on notice of the State's tax lien because the lien was not recorded; and that "the tax sale was subject to [Deutsche Bank's] mortgage." The Garcias appeal the denial of their motion.
{¶5} In this appeal, we address only the narrow issue of whether the district court abused its discretion in denying the Garcias' Rule 1-060(B) motion. We first set out the law pertaining to Rule 1-060(B) motions, as relevant, including the standard of review applicable to the denial of such motions. We then examine whether the Garcias establish that the district court erred in concluding the State was not a necessary and indispensable party to the foreclosure action. Determining that the Garcias do not make this showing, we affirm the district court's denial of the Rule 1-060(B) motion on this basis and then briefly consider the parties' remaining arguments.
{¶6} Rule 1-060(B)(4), under which we analyze the Garcias' appeal, [1] provides that, "[o]n motion and on such terms as are just, the court may relieve a party . . . from a final judgment, order, or proceeding" if "the judgment is void." "A judgment is void only if the court rendering it lacked jurisdiction of the subject matter, or of the parties, or acted in a manner inconsistent with due process of law." Classen v. Classen, 1995-NMCA-022, ¶ 10, 119 N.M. 582, 893 P.2d 478 (emphasis, internal quotation marks, and citation omitted).
{¶7} On appeal from the denial of a Rule 1-060(B) motion, this Court's review is limited to the question of whether the denial of the motion was erroneous; that is, we will not review the merits of the decision sought to be reopened. See James v. Brumlop, 1980-NMCA-043, ¶ 9, 94 N.M. 291, 609 P.2d 1247. Our review is generally for an abuse of discretion, although we review questions of law de novo. See Deutsche Bank Nat'l Tr. Co. as Tr. for New Century Home Equity Loan Tr. 2004-3 v. Valerio, 2021-NMCA-035, ¶ 25, 493 P.3d 493; see also id. ¶ 18 ().
{¶8} The Garcias advanced below, and now maintain on appeal, one principal argument in support of their Rule 1-060(B)(4) motion, and we limit our analysis accordingly. The Garcias' theory as to why the judgment and order is void under Rule 1-060(B)(4) appears to take the following form. Because the State, to which the Garcias are purported successors in interest, [2] had an interest in the Property as a tax lienholder, the State was a necessary and indispensable party to the foreclosure action under Rule 1-019(A); hence, because the State was never joined to the action, the district court lacked jurisdiction to enter, or violated due process by entering, the judgment and order, thereby rendering it void.[3]
{¶9} The district court rejected the Garcias' argument. Relying on Section 7-38-48, the statute creating tax liens in favor of the State for delinquent taxes on real property, the district court held that the State was not a necessary and indispensable party. The court explained:
By operation of . . . Section 7-38-48, the property tax lien is a super lien, even as to prior perfected liens. Therefore, [Deutsche Bank] did not need to name the State of New Mexico to the foreclosure since the lien ran with the land and would not be foreclosed.[4]
Ultimately, the Garcias do not convince us, and we do not otherwise perceive, that the district court's ruling in this regard was an abuse of discretion. See, e.g., State v. Aragon, 1999-NMCA-060, ¶ 10, 127 N.M. 393, 981 P.2d 1211 (); see also L.D. Miller Constr., Inc. v. Kirschenbaum, 2017-NMCA-030, ¶¶ 15-16, 392 P.3d 194 (). We explain, turning first to Rule 1-019(A) and then to Section 7-38-48(A).
{¶10} Rule 1-019(A) dictates when a person subject to service of process is a necessary and indispensable party-i.e., when such a person must be joined as a party in an action. See State ex rel. Clinton Realty Co. v. Scarborough, 1967-NMSC-152, ¶ 2, 78 N.M. 132, 429 P.2d 330 (characterizing a person that must be joined as a party in an action as a "necessary and indispensable" party). For their contention that the State is a necessary and indispensable party to the foreclosure action, the Garcias rely on Rule 1-019(A)(2)(a). The Rule provides that a person "shall be joined as a party in the action" if he or she (i) "claims an interest relating to the subject of the action" and (ii) "is so situated that the disposition of the action in his [or her] absence may . . . as a practical matter impair or impede his [or her] ability to protect that interest." Rule 1-019(A)(2)(a). While the State, as a tax lienholder, might have met the first condition of Rule 1-019(A)(2)(a), the second condition is another matter.
{¶11} To understand why, we look at Section 7-38-48(A), which delineates the nature and status of a state tax lien. Section 7-38-48(A) provides in relevant part:
[T]axes on real property are a lien against the real property . . . . The lien runs in favor of the state and secures the payment of taxes on the real property and any penalty and interest that become due. The lien continues until the taxes and any penalty and interest are paid. The lien created by this section is a first lien and paramount to any other interest in the property, perfected or unperfected.
As the district court recognized, the State's lien against the Property was, pursuant to this provision, "a first lien and paramount to any other interest in the property perfected or unperfected." Section 7-38-48(A). Such "other interest" would plainly include that of Deutsche Bank. With the State's interest in the Property thus paramount to that of Deutsche Bank by operation of Section 7-38-48(A), the second Rule 1-019(A)(2)(a) condition, quoted above, was not met. That is, since the foreclosure necessarily affected only those interests inferior to the State's, see 59A C.J.S. Mortgages § 915 (2022) (), the State was not "so situated that the disposition of the [foreclosure] action in [the State's] absence [could] . . . as a practical matter [have] impair[ed] or impede[d its] ability to protect that...
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