Nationstar Mortg. LLC v. O'Malley

• Decision Date: 06 February 2018
• Docket Number: No. A-1-CA-35518,A-1-CA-35518
• Parties: NATIONSTAR MORTGAGE LLC, d/b/a Champion Mortgage Company, Plaintiff-Appellant, v. Sheila J. O'MALLEY, Defendant-Appellee, and Timothy W. O'Malley, If Living; If Deceased the Unknown Heirs of Timothy W. O'Malley, Deceased; United States of America By and Through the Secretary of Housing and Urban Development; Occupants of the Property, Defendants.
• Court: Court of Appeals of New Mexico

415 P.3d 1022

NATIONSTAR MORTGAGE LLC, d/b/a Champion Mortgage Company, Plaintiff-Appellant,

v. Sheila J. O'MALLEY, Defendant-Appellee,andTimothy W. O'Malley, If Living; If Deceased the Unknown Heirs of Timothy W. O'Malley, Deceased; United States of America By and Through the Secretary of Housing and Urban Development; Occupants of the Property, Defendants.

No. A-1-CA-35518

Court of Appeals of New Mexico.

Filing Date: February 6, 2018

Certiorari Denied, March 28, 2018, No. S-1-SC-36917

McCarthy & Holthus, LLP, Joshua T. Chappell, Karen H. Weaver, Albuquerque, NM, Murr Siler & Accomazzo, P.C., James P. Eckels, Jamie G. Siler, Denver, CO, Jared Daniel Albert Najjar, Santa Fe, NM, for Appellant.

Dixon • Scholl • Carillo • P.A., Orlando C. Martinez, Albuquerque, NM, for Appellee.

BOHNHOFF, Judge.

{1} Plaintiff Nationstar Mortgage, LLC, d/b/a Champion Mortgage Co. (Nationstar), appeals the district court's order granting summary judgment in favor of Defendant Sheila J. O'Malley. The district court ruled that, pursuant to NMSA 1978, Section 40-3-13 (1993), a mortgage of residential property that Mrs. O'Malley's husband executed in favor of Nationstar was void because Mrs. O'Malley did not execute it as well. We hold that the mortgage was valid, because Mrs. O'Malley earlier had entered into a sole and separate property agreement that transmuted the couple's community property to her husband's separate property. We therefore reverse the summary judgment.

BACKGROUND

A. Factual History

{2} The salient facts are undisputed. In September 2010, Timothy (Husband) and Sheila (Wife) O'Malley acquired residential property in Taos, New Mexico (the Property); the deed conveyed title to them as joint tenants with right of survivorship. According to Wife's affidavit supporting her motion for summary judgment, Husband was an attorney and handled the couple's assets and finances. In early 2012, the O'Malleys were interested in purchasing an adjoining lot. "At that time, my husband had me sign some documents in order to purchase the adjacent lot and combine it with the Property." One of those papers apparently was a "SOLE AND SEPARATE PROPERTY AGREEMENT AND CONVEYANCE" (SSPAC), which Husband and Wife executed in the presence of a notary on March 7, 2012. The SSPAC provides as follows:

Pursuant to [ NMSA 1978, Section 40-3-8(A)(5) (1990) ], Timothy W. O'Malley and Sheila J. O'Malley, husband and wife, agree that the property described as [Property's legal description] is hereby designated as the separate property of Timothy W. O'Malley. Sheila J. O'Malley hereby expressly grants and conveys the above property to Timothy W. O'Malley with special warranty covenants. Sheila J. O'Malley further, expressly waives, relinquishes and releases any and all right, title, claim or interest in and to the above described property heretofore or hereafter acquired.

{3} The contemplated purchase of the adjoining lot did not occur. Instead, on April 16, 2012, Husband executed in favor of MetLife Home Loans, a division of MetLife Bank, N.A. (MetLife), an "Adjustable Rate Note (Home Equity Conversion)" and an "Adjustable Rate Deed of Trust (Home Equity Conversion)." The deed of trust states that, "THIS DEED OF TRUST SECURES A REVERSE MORTGAGE LOAN," and the parties otherwise characterize the transaction as a reverse mortgage loan transaction.¹ Both the SSPAC and the deed of trust (Reverse Mortgage) were recorded with the Taos County Clerk on April 20, 2012. The SSPAC's and Reverse Mortgage's recording information show filing times of 2:08:25 p.m. and 2:08:27 p.m., respectively.

{4} On June 1, 2012, Husband deeded the Property to himself and Wife "as joint tenants with right of survivorship," i.e., the deed returned the Property to its pre-March 7, 2012, ownership status.

{5} On October 22, 2012, MetLife assigned the Reverse Mortgage to Nationstar, which is a business name of Champion Mortgage Company. The assignment was recorded on November 8, 2012.

{6} In the interim, Husband died on June 30, 2014. Wife states in her affidavit that she was not aware of the reverse mortgage transaction until sometime after her husband's passing when she received correspondence from Nationstar.

B. Procedural History

{7} In December 2014, Nationstar filed its complaint with the district court, seeking a judgment foreclosing on its security interest in the Property pursuant to the Reverse Mortgage and authorization to sell the Property to satisfy the underlying debt that Nationstar alleged totaled approximately $375,000. Nationstar did not claim that Wife was personally liable for the debt. In her answer, Wife generally denied or stated her lack of knowledge with respect to the complaint's allegations, but also asserted without elaboration affirmative defenses of "lack and failure of consideration," "mistake," and "fraudulent conduct and bad faith" on the part of Nationstar.

{8} In December 2015, Wife filed a motion (the Motion) to dismiss the complaint for failure to state a claim, or in the alternative, for summary judgment. Based solely on her aforementioned affidavit testimony that "my husband had me sign some documents in order to purchase the adjacent lot and combine it with the Property," Wife asserted in her statement of undisputed material facts that, "Mr. O'Malley had [Mrs.] O'Malley sign a [SSPAC] under the pretense that it was necessary to facilitate the purchase of the adjacent lot and combine it with the Property." However, in her motion Wife did not otherwise claim, or even suggest, fraudulent or other nefarious conduct on the part of Husband, much less MetLife. On the contrary, her argument was strictly legal: the Property was community property; pursuant to Section 40-3-13 and NMSA 1978, Section 47-1-7 (1901), the Reverse Mortgage was void both because Wife did not sign it and because the March 7, 2012, SSPAC was not recorded before the Reverse Mortgage was executed. Similarly, she contended that, because the June 1, 2012, deed re-conveyed the Property to Husband and Wife, the subsequent assignment of the Mortgage from MetLife to Nationstar was void as well because both Husband and Wife failed to sign it. On the same day, Wife moved for a protective order excusing her from responding to what she characterized as "voluminous sets of discovery" propounded by Nationstar until after the district court ruled on her Motion.

{9} Nationstar timely responded in opposition to the motion for protective order but not the Motion. However, on January 21, 2016, Nationstar moved for leave to file a response to the Motion with a copy of the proposed substantive response attached. Nationstar argued therein that: pursuant to Section 40-3-8(A)(5), the Property was transmuted to Husband's separate property on March 7, 2012, as a result of Wife's execution of the SSPAC; the SSPAC was effective as against Wife notwithstanding the fact that it was not immediately recorded; Section 40-3-13 and Section 47-1-7 did not invalidate the Reverse Mortgage because as of April 16, 2012, the Property was no longer community property and, among other reasons, the SSPAC was not a power of attorney; because the Reverse Mortgage was not community property, Section 40-3-13 did not invalidate the October 22, 2012, assignment. Nationstar did not dispute Wife's statement of undisputed material facts. However, Nationstar requested that, assuming the district court did not deny the Motion on the basis of these legal arguments pursuant to Rule 1-056(F) NMRA, the district court should postpone ruling on the request for summary judgment until after Nationstar had an opportunity to conduct discovery.

{10} The district court scheduled a motions hearing for February 3, 2016. The morning of the hearing, Nationstar's counsel filed an affidavit pursuant to Rule 1-056(F), asserting that, in order to respond fully to Wife's summary judgment request, Nationstar needed answers to the discovery it already had propounded—and which was the subject of Wife's protective order motion—and might need additional discovery regarding "the facts surrounding ... Defendant's acquisition of the property at issue, the execution and recording of the [SSPAC], the execution and recording of the [Reverse] Mortgage, ... and the reconveyance of the property to [Husband and Wife]."

{11} During the hearing, the district court stated that, in view of the affidavit and documents attached and referred to in the Motion, it would treat the Motion as one for summary judgment. The court asked Wife's counsel to address Nationstar's argument that it would need additional time to conduct discovery. Wife's counsel stated that he did not believe there was a disputed issue of fact that was necessary to resolve the case, but also argued that the Rule 1-056(F) affidavit was not sufficiently specific and Nationstar had not disputed Wife's statement of undisputed material facts. The district court characterized Wife's motion as a legal argument, but then indicated its understanding that Wife's position was that she signed the SSPAC under false pretenses, that she thought it was executed for purposes of acquiring the adjoining lot and it was not given for purposes of the reverse mortgage. Wife's counsel responded by stating that those facts were not needed to rule on the motion.

{12} The district court then ruled that it would grant Wife's motion. As grounds for its ruling, the court stated that Wife had made a prima facie showing that she was entitled to summary judgment and that Nationstar had not come forward with any facts to rebut that showing and that it would not be able to proffer any facts even if it was permitted additional discovery. In its written order, the district court deemed Wife's statement of undisputed material facts admitted by Nationstar, and stated that Wife had made a prima facie showing of entitlement to summary judgment based on Section 40-3-13, Nationstar had not rebutted that showing, and additional discovery was not necessary for adjudicating...