Fed. Nat'l Mortg. Ass'n v. Trissell

• Decision Date: 24 May 2021
• Docket Number: A-1-CA-37395
• Citation: 503 P.3d 381
• Parties: FEDERAL NATIONAL MORTGAGE ASSOCIATION ("FANNIE MAE"), a corporation organized and existing under the laws of the United States of America, Plaintiff-Appellee, v. Bernie B. TRISSELL and Michael D. Trissell, Defendants-Appellants.
• Court: Court of Appeals of New Mexico

503 P.3d 381

FEDERAL NATIONAL MORTGAGE ASSOCIATION ("FANNIE MAE"), a corporation organized and existing under the laws of the United States of America, Plaintiff-Appellee,

v.Bernie B. TRISSELL and Michael D. Trissell, Defendants-Appellants.

No. A-1-CA-37395

Court of Appeals of New Mexico.

Filing Date: May 24, 2021

Certiorari Denied, December 22, 2021, No. S-1-SC-38867

McCarthy & Holthus, LLP Joshua T. Chappell Albuquerque, NM, Akerman LLP Michael J. McKleroy, Jr. Dallas, TX for Appellee

Durham, Pittard & Spalding, LLP Caren I. Friedman Santa Fe, NM for Appellants

IVES, Judge.

{1} In this foreclosure action, Defendants Bernie and Michael Trissell appeal the district court's entry of summary judgment for Plaintiff Federal National Mortgage Association (Fannie Mae), arguing that (1) Plaintiff lacked standing, (2) the district court erred by entering summary judgment against Defendants on their affirmative defenses, and (3) the district court should have allowed Defendants to conduct additional discovery before ruling on Plaintiff's summary judgment motion. Unpersuaded, we affirm.

{2} However, we acknowledge that precedents from our Supreme Court and this Court are unclear on a pivotal issue in this case: the allocation of summary judgment burdens where the plaintiff is the moving party. We therefore issue this precedential opinion to explain our understanding that, in New Mexico, once a plaintiff-movant has made a prima facie case on its claim alone, a defendant resisting summary judgment with an affirmative defense has the burden of demonstrating a genuine issue of material fact as to the defense. Applying that rule to this case, we hold that Defendants failed to carry their burden and thus failed to overcome Plaintiff's prima facie showing of entitlement to judgment on its claim.

BACKGROUND

{3} In 2008, Defendants executed a promissory note in favor of Lewallen Mortgage, Inc., secured by a mortgage that Defendants executed that same day. By August 2010, a different mortgage company, SunTrust Mortgage, Inc., was servicing Defendants’ loan, and Defendants contacted SunTrust to discuss a recent increase in the amount of their monthly loan payment. Defendants later failed to remit the installment that was due on January 1, 2011, and asked SunTrust to modify the loan. SunTrust declined and, in February 2011, notified Defendants that their loan was in default. After it had been assigned the mortgage, SunTrust brought a foreclosure action against Defendants. SunTrust eventually assigned the mortgage to Plaintiff, and Plaintiff was substituted for SunTrust as the plaintiff. The original foreclosure action was dismissed without prejudice for lack of prosecution in November 2015.

{4} Plaintiff initiated the present foreclosure action in March 2016. Plaintiff attached to its complaint a copy of the promissory note, which SunTrust had indorsed in blank, along with an allonge showing a special indorsement from Lewallen to SunTrust. Defendants raised thirteen affirmative defenses in their answer. Plaintiff moved for summary judgment on the claim in its complaint and on Defendants’ affirmative defenses. In their response, Defendants, while elaborating upon only some of their affirmative defenses, argued that summary judgment was improper because Plaintiff had failed to make a prima facie showing of entitlement to summary judgment on those defenses. After Plaintiff filed its reply, the district court allowed both parties to file sur-replies. Following a hearing, the district court granted the motion and entered judgment for Plaintiff. Defendants appeal.

DISCUSSION

I. Standard of Review

{5} "We review the district court's grant of summary judgment de novo." HSBC Bank USA v. Wiles , 2020-NMCA-035, ¶ 8, 468 P.3d 922, cert. denied , 2020-NMCERT-–––– (No. S-1-SC-38290, June 8, 2020). Summary judgment is appropriate where "there is no genuine issue as to any material fact and ... the moving party is entitled to a judgment as a matter of law." Rule 1-056(C) NMRA. We "review the whole record in the light most favorable to the party opposing summary judgment to determine if there is any evidence that places a genuine issue of material fact in dispute." Wiles , 2020-NMCA-035, ¶ 8, 468 P.3d 922 (internal quotation marks and citation omitted).

{6} A summary judgment movant bears the "initial burden of establishing a prima facie case for summary judgment." Romero v. Philip Morris Inc. , 2010-NMSC-035, ¶ 10, 148 N.M. 713, 242 P.3d 280. A movant establishes a prima facie case when the motion is supported by "such evidence as is sufficient in law to raise a presumption of fact or establish the fact in question unless rebutted." Id. (internal quotation marks and citation omitted). "[U]ntil a party has made a prima facie showing that it is entitled to summary judgment, the nonmoving party is not required to make any showing with respect to factual issues." Knapp v. Fraternal Order of Eagles , 1987-NMCA-064, ¶ 9, 106 N.M. 11, 738 P.2d 129. When "the facts are not in dispute," a court's only task is to determine the "legal effect of [those] facts." Koenig v. Perez , 1986-NMSC-066, ¶ 10, 104 N.M. 664, 726 P.2d 341.

II. The District Court Did Not Err by Granting Plaintiff's Motion for Summary Judgment

{7} We affirm the district court's entry of summary judgment, holding that (A) Plaintiff had standing; (B) Defendants bore the burden of showing that a genuine dispute of material fact on their affirmative defenses precluded summary judgment and their contentions that they met this burden do not merit review; and (C) Defendants failed to preserve their argument that the district court erred by not allowing Defendants to conduct additional discovery before ruling on Plaintiff's summary judgment motion.

A. Plaintiff Had Standing

{8} Standing to foreclose depends on whether the foreclosing party can "demonstrate that it had the right to enforce the note and the right to foreclose the mortgage at the time the foreclosure suit was filed." PNC Mortg. v. Romero , 2016-NMCA-064, ¶ 19, 377 P.3d 461 (alteration, internal quotation marks, and citation omitted). To establish its right to enforce the promissory note underlying the mortgage, a third party seeking foreclosure must prove that, "at the time of filing," Deutsche Bank Nat'l Tr. Co. v. Johnston , 2016-NMSC-013, ¶ 27, 369 P.3d 1046 (emphasis omitted), it had "both physical possession and the right to enforcement through either a proper indorsement or a transfer by negotiation." Bank of N.Y. v. Romero , 2014-NMSC-007, ¶ 21, 320 P.3d 1. The "holder" of the note has a right to enforce it and foreclose the mortgage. See NMSA 1978, § 55-3-301 (1992) (providing that the "holder of [an] instrument" is a person entitled to enforce it); Johnston , 2016-NMSC-013, ¶ 14, 369 P.3d 1046 (explaining that the statutory "definition of who may enforce a note" guides the determination of whether a particular plaintiff has established "an injury in fact sufficient to confer standing" to foreclose); Wiles , 2020-NMCA-035, ¶¶ 12-13, 468 P.3d 922 (affirming "the long-standing principle that ‘the mortgage follows the note’ "). The Uniform Commercial Code defines "holder" as "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[.]" NMSA 1978, § 55-1-201(b)(21)(A) (2005). Accordingly, a foreclosing party may establish that it is the holder of a note—and therefore entitled to enforce it—by attaching to the initial complaint a note that is indorsed to the foreclosing party or in blank. See Johnston , 2016-NMSC-013, ¶ 23, 369 P.3d 1046 (explaining that a foreclosing party may establish its right to enforce the note by "attaching a note containing an undated indorsement to the initial complaint").

{9} Here, Plaintiff demonstrated that it had standing to foreclose by attaching a note containing a blank indorsement to its initial complaint. See generally Bank of N.Y. , 2014-NMSC-007, ¶ 24, 320 P.3d 1 ("A blank indorsement, as its name suggests, does not identify a person to whom the instrument is payable but instead makes it payable to anyone who holds it as bearer paper."). Although Defendants do not contest that the note attached to the initial complaint was indorsed in blank, Defendants argue that Plaintiff failed to prove its right to enforce the note because Plaintiff did not demonstrate a transfer of the note or that it was the holder. Compare § 55-3-301 (providing that the "holder of [an] instrument" is entitled to enforce it), with id. (providing that "a nonholder in possession of the instrument who has the rights of a holder" is entitled to enforce the instrument), and NMSA 1978, § 55-3-203 cmt. 2 (1992) (explaining that a "transferee is not a holder" when "the transferor did not indorse" and, in that situation, the transferee must demonstrate that it "obtained the rights of the transferor" through proof of "the transaction through which the transferee acquired" the unindorsed instrument). However, by attaching a note with a blank indorsement to its initial complaint, Plaintiff did establish itself as the holder at the time the complaint was filed. See Johnston , 2016-NMSC-013, ¶ 23, 369 P.3d 1046. Defendants argue further that Plaintiff failed to present sufficient evidence that it possessed the original note. Although Plaintiff attempted to prove its possession of the note in various ways, attaching a copy of the original note to the initial complaint was sufficient. Compare Wiles , 2020-NMCA-035, ¶ 10, 468 P.3d 922 (holding that the plaintiff "established a prima facie case of standing" when it "attached a copy of the [n]ote indorsed in blank to its complaint"), with Los Alamos Nat'l Bank v. Velasquez , 2019-NMCA-040, ¶ 16, 446 P.3d 1220 (analyzing whether there was evidence "to establish that [the plaintiff] had possession of the note at the time it filed the complaint" because the note "was neither attached to the initial complaint nor...