Mortgage Electronic Registration v. Montoya

Decision Date07 May 2008
Docket NumberNo. 27,465.,27,465.
Citation2008 NMCA 081,186 P.3d 256
PartiesMORTGAGE ELECTRONIC REGISTRATION SYSTEMS, INC., as nominee for Deutsche Bank Trust Company Americas, f/k/a Bankers Trust Company, as trustee; and Mortgage Electronic Registration Systems, Inc., as nominee for J.P. Morgan Chase Bank, as trustee, Plaintiffs, v. Urban T. MONTOYA, a/k/a Thomas Urban Montoya, Emily A. Montoya, The New Mexico State Highway and Transportation Department, and John Doe and Jane Doe (true names unknown), tenants, Defendants, and Virginia Zamora, as assignee of Urban T. Montoya and Emily A. Montoya, Petitioner-Appellee, and Indu Kaushal, Respondent-Appellant.
CourtCourt of Appeals of New Mexico

E. Justin Pennington, Law Offices of E. Justin Pennington, Albuquerque, NM, for Appellee.

Sylvain Segal, Law Offices of Segal & Whittaker, LLP, Albuquerque, NM, for Appellant.

OPINION

SUTIN, Chief Judge.

{1} The question in this appeal is whether a junior mortgagee who forecloses its mortgage, along with foreclosure of the senior mortgage, and obtains a deficiency judgment has a right to redeem under the New Mexico redemption statute, NMSA 1978, § 39-5-18(A) (1987) (amended 2007), that was applicable at the time of the foreclosure and redemptions at issue in this appeal. For the reasons we explain in this opinion, we reverse.

BACKGROUND

{2} Mortgage Electronic Registration Systems, Inc. (MERS), acting separately for two different banks, one holding a senior mortgage and the other holding a junior mortgage, sued to foreclose both mortgages on residential property owned by mortgagors Urban T. Montoya and Emily A. Montoya. A foreclosure judgment was entered awarding the senior mortgagee judgment in the sum of $132,039.29 and awarding the junior mortgagee judgment in the sum of $35,565.29. The foreclosure sale resulted in full satisfaction of the senior mortgage debt for what appears to have been a total of $136,357.45, which included the costs of sale and accrued interest. The sale resulted in partial satisfaction of the junior mortgage debt of $37,328.59, leaving a deficiency of $24,242.76.

{3} We refer to the junior mortgagee who obtained a deficiency judgment as MERS. The purchaser at foreclosure sale was "Ashok K. Kaushal and Indu Kaushal, trustees for the Ashok K. Kaushal and Indu Kaushal Revocable Trust Agreement." We refer to Ashok K. Kaushal as Ashok and to Indu Kaushal as Indu. For ease of reading, we refer to the mortgagors as the debtors.

{4} The sale occurred on August 1, 2006. On the day the order approving the sale was entered, August 11, 2006, Indu, individually, petitioned for a certificate of redemption based on two assignments, namely: (1) an assignment by MERS dated August 10, 2006, of a redemption right to Ashok, a married man, as his sole and separate property; and (2) an assignment dated August 11, 2006, by Ashok to Indu, a married woman, as her sole and separate property, of the redemption right MERS had assigned to Ashok. Also on August 11, 2006, Indu deposited $153,000 with the clerk of the court. The district court entered a stipulated order approving the petition, which directed the court clerk to issue a redemption certificate to Indu and disburse $153,000 plus interest to Ashok. The court clerk issued a certificate of redemption to Indu on August 17, 2006.

{5} On August 30, 2006, Virginia Zamora petitioned for a certificate of redemption based on an assignment to her dated August 28, 2006, of the debtors' redemption right. Zamora deposited a check in the sum of $155,000 with the clerk of the court. Zamora then moved to set Indu's certificate of redemption aside. Zamora claimed that MERS' assignment was invalid and void because its mortgage interest in the property had been foreclosed by the foreclosure decree and the subsequent sale, and MERS could therefore no longer be characterized as a junior mortgagee or other lienholder entitled to redeem; that is, because MERS "converted its mortgage interest to [a] money judgment by its own foreclosure suit, it had no redemption right to assign." The district court entered an order vacating Indu's certificate of redemption. Zamora paid a redemption amount of $158,333.33 and received a certificate of redemption. Indu appealed.

DISCUSSION

{6} There are no challenges in this case to the adequacy of the price paid at the foreclosure sale, to the adequacy of the amounts paid by the various persons redeeming the property, or to the validity of or otherwise to the adequacy of the consideration given for the assignments of the redemption rights. Nor do the parties raise any issue as to whether any assignee of a redemption right is to be treated differently in any respect than the original assignor of the redemption right. Priority is not an issue. In the district court, Zamora conceded that, if MERS' assignment was valid, Indu's redemption satisfied "the first in time rule" adopted in HSBC Bank USA v. Fenton, 2005-NMCA-138, ¶¶ 1, 10, 138 N.M. 665, 125 P.3d 644.

{7} The outcome of this appeal hinges on the interpretation of a statute, and our review is therefore de novo. State v. Padilla, 2008-NMSC-006, ¶ 7, 143 N.M. 310, 176 P.3d 299; see also HSBC Bank, 2005-NMCA-138, ¶ 5, 138 N.M. 665, 125 P.3d 644 (stating that our review is de novo, when we are required to construe a statute).

{8} In the present case we are required to construe the applicable redemption statute, Section 39-5-18(A) (1987), which in part reads:

After sale of any real estate pursuant to any such judgment or decree of any court, the real estate may be redeemed by the former defendant owner of the real estate, his heirs, personal representatives or assigns or by any junior mortgagee or other junior lienholder[.]

"One of the purposes of the redemption statute is to give the property owner, or certain others listed under the redemption statute, a reasonable opportunity to redeem the property." Chase Manhattan Bank v. Candelaria, 2004-NMSC-017, ¶ 9, 135 N.M. 527, 90 P.3d 985. "[T]he commonly stated purposes of statutory redemption are to encourage full value bidding at foreclosure sales and to protect mortgagors." HSBC Bank, 2005-NMCA-138, ¶ 7, 138 N.M. 665, 125 P.3d 644; Brown v. Trujillo, 2004-NMCA-040, ¶ 27, 135 N.M. 365, 88 P.3d 881 (stating that redemption statutes protect the debtor because they "may increase the price of property at a foreclosure sale by creating the risk that a debtor will easily redeem his or her property from a purchaser who bids too low"). But see W. Bank of Las Cruces v. Malooly, 119 N.M. 743, 751, 895 P.2d 265, 273 (Ct.App. 1995) (Hartz, J., concurring) (stating that some authorities question whether statutory redemption laws encourage higher bidding at foreclosure sales). In considering a clash of interests, the court can consider "overriding equitable considerations." HSBC Bank, 2005-NMCA-138, ¶ 10, 138 N.M. 665, 125 P.3d 644.

{9} The question before us is whether the holder of a junior mortgage who forecloses its mortgage remains a "junior mortgagee" under Section 39-5-18(A), thereby entitling it to redeem. No New Mexico case addresses this question. At least one New Mexico case appears to assume that a junior mortgagee who has foreclosed his mortgage has a right to redeem. See Springer Corp. v. Kirkeby-Natus, 80 N.M. 206, 210, 453 P.2d 376, 380 (1969) (holding that, in a case in which an omitted junior mortgagee foreclosed its mortgage, the junior mortgagee had the absolute right to redeem from the senior mortgagee who had purchased the property at a sale following foreclosure of the senior mortgage). Other cases note that junior mortgagees and lien creditors can redeem or have redeemed, but do not expressly indicate that the holders of the junior mortgage or judgment lien foreclosed their liens against the debtor's property. See HSBC Bank, 2005-NMCA-138, ¶¶ 2, 4, 138 N.M. 665, 125 P.3d 644 (holding that an assignee of the lien creditor, who petitioned for certification of redemption, had priority over an assignee of the former defendant owner based on a first-in-time filing of the redemption petition); Malooly, 119 N.M. at 747, 895 P.2d at 269 (holding that the redemption statute authorized an assignee of a junior lien creditor to redeem); see also Crown Life Ins. Co. v. Candlewood, 112 N.M. 633, 634, 818 P.2d 411, 412 (1991) (noting the purchase of the former defendant owners' "statutory redemption rights, as well as the rights of the second mortgagee"); Leonard Farms v. Carlsbad Riverside Terrace Apartments, Inc., 86 N.M. 241, 242, 522 P.2d 576, 577 (1974) (noting that "a judgment creditor of [the debtor had] assigned its judgment (and therefore its redemption rights)"). "[A] mortgagor's assignee takes property redeemed after foreclosure free of all prior junior judgment liens not his own." Turner v. Les File Drywall, Inc., 117 N.M. 7, 9, 868 P.2d 652, 654 (1994).

{10} The parties do not refer or cite to any portion of the hearing on whether Zamora's petition should prevail, which indicates to us that the parties do not believe that anything that occurred in that hearing has significance as to the issues before us. They do not point to, and we are unable to locate in the record, any reasons given for or any authority cited by the district court to support its order setting aside Indu's certificate of redemption. Because Zamora relied almost solely on the argument that MERS lost its junior mortgagee interest when it foreclosed its own mortgage, was therefore no longer a junior mortgagee as contemplated under Section 39-5-18(A), and thus had no right to redeem, we address only the narrow question raised by that argument and assume that the court agreed with Zamora's position.

{11} Indu relies on the wording of Section 39-5-18 and on Springer Corp. in arguing that a junior mortgagee's right of redemption survives the foreclosure. She points to the statutory language which states that "any junior mortgagee" can redeem and to the holding in Springer Corp. that the...

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