Phx. Funding, LLC v. Aurora Loan Servs., LLC

Decision Date26 January 2017
Docket NumberNO. S-1-SC-35512,S-1-SC-35512
Citation390 P.3d 174
Parties PHOENIX FUNDING, LLC, Plaintiff-Respondent, v. AURORA LOAN SERVICES, LLC and Mortgage Electronic Registration Systems, Inc., Defendants-Petitioners.
CourtNew Mexico Supreme Court

Murr Siler & Accomazzo, P.C., Joshua A. Spencer, Albuquerque, NM, Jamie G. Siler, James P. Eckels, Denver, CO, for Petitioners.

William F. Davis & Associates, P.C., Nephi Hardman, Albuquerque, NM, for Respondent.



{1} We are called to decide whether a 2009 default foreclosure judgment may be collaterally attacked based on assertions that the judgment was void for lack of jurisdiction and procured by fraud. In this case, those assertions were made by Phoenix Funding, LLC, which attempted to overturn a settled foreclosure judgment entered in favor of Aurora Loan Services, LLC. We hold that the 2009 default judgment was not void and that Phoenix's fraud claim is procedurally barred. Accordingly, we reverse the judgment of the Court of Appeals, reinstate the district court's grant of summary judgment to Aurora, and remand to the district court with instructions to dismiss Phoenix's fraud claim.


{2} On December 13, 2006, Kirsten Hood executed a promissory note payable to GreenPoint Mortgage Funding, Inc., for the purchase of a home in Santa Fe, New Mexico (the Property). This note was secured by a mortgage in favor of Mortgage Electronic Registration Systems, Inc., (MERS), as nominee for GreenPoint.

{3} By way of the following transactions, the Hood note was eventually transferred from GreenPoint to Aurora. First, after origination, the note was pooled into a securitized trust—namely, GreenPoint Mortgage Funding Trust Mortgage Pass-Through Certificates, Series 2007-ARI. An agreement that created this securitized trust indicated that the Hood note was held by Lehman Brothers Holdings Inc., which transferred it to Structured Asset Securities Corporation, who then transferred the note to U.S. Bank National Association. In January 2009, the note was transferred to Aurora.

{4} On March 3, 2009, Aurora filed a foreclosure complaint in district court, alleging that Hood had defaulted on the note. Aurora alleged that it was, by assignment, the current holder of the note and mortgage. Aurora attached to its complaint an unindorsed copy of both the Hood note and a document entitled "Corporate Assignment of Mortgage" indicating that MERS had assigned to Aurora the mortgage "together with the Note...."

{5} Because Hood did not respond to Aurora's complaint, the district court entered default judgment on October 8, 2009, finding that the note and mortgage had been properly assigned to Aurora. The district court also found that Hood had defaulted on the note, ordered the mortgage foreclosed, and appointed a special master to conduct a foreclosure sale. Hood neither redeemed the Property nor appealed the district court's order.

{6} Aurora purchased the Property at the foreclosure sale and recorded a Special Master's Deed. On August 23, 2010, the district court entered an order that confirmed the sale of the Property to Aurora and approved the Special Master's Deed.{7} Enter Gregory Hutchins, a speculator in foreclosed properties. Seeking to procure the Property, on November 3, 2011—fourteen months after the district court approved the Special Master's Deed—Hutchins obtained a quitclaim deed to the Property from Hood for "valuable consideration." Hood executed the quitclaim deed on November 3, 2011, despite the 2009 default judgment against her. The deed was recorded on the same day.

{8} Hutchins then attempted to transfer the Property to Phoenix, a New Mexico limited liability company of which Hutchins was the sole member. Hutchins first executed a note, promising to pay $ 750,000.00 to Phoenix. As security for the note, he executed a mortgage in favor of Phoenix, encumbering his supposed interest in the Property.

{9} On March 1, 2012, Phoenix filed a complaint against Hutchins, GreenPoint, Aurora, and MERS. Against Hutchins, Phoenix asserted actions for judgment on the note, foreclosure on the Property, and quiet title. This Court recognizes that, by directing Phoenix to assert these claims in this case, Hutchins effectively sued himself in his attempt to take control of the Property.

{10} Against GreenPoint, Aurora, and MERS, Phoenix asserted claims for declaratory judgment and quiet title. Phoenix argued that because Aurora did not attach a copy of an indorsed note to its 2009 foreclosure complaint against Hood, Aurora lacked standing to commence suit. Phoenix alleged that the district court was consequently without jurisdiction and, thus, the 2009 default judgment against Hood and the resulting foreclosure sale were void. Phoenix sought an order quieting title to itself in fee simple.

{11} Aurora and MERS answered and asserted counterclaims against Phoenix and crossclaims against Hutchins to cancel the quitclaim deed and the Hutchins mortgage. Aurora and MERS also asserted counterclaims and crossclaims against Phoenix and Hutchins, respectively, for declaratory judgment and quiet title. GreenPoint did not answer the complaint, leading to the district court's entry of default judgment. Hutchins responded to Phoenix's complaint by disclaiming all interest in the matter.

{12} Aurora, MERS, and Phoenix cross-moved for summary judgment. Aurora and MERS argued, inter alia, that Aurora had standing to assert the 2009 foreclosure action against Hood, that Phoenix's claims were barred by res judicata, and that Phoenix's complaint was an improper collateral attack on the 2009 default judgment against Hood. Phoenix, by contrast, repeated its argument that the 2009 district court lacked jurisdiction to adjudicate the Hood action because Aurora lacked standing to foreclose.

{13} Phoenix also argued in its summary judgment motion that Aurora committed fraud by attaching the Corporate Assignment of Mortgage to its 2009 foreclosure action against Hood. Phoenix's fraud claim alleged that Aurora was not a successor to GreenPoint and, therefore, lacked the right either to prepare the Corporate Assignment or to direct MERS to do so. According to Phoenix, Aurora's attachment of the Corporate Assignment to Aurora's 2009 complaint constituted a fraud on the district court that warranted setting aside the 2009 foreclosure judgment. In its complaint, Phoenix did not assert a claim to set aside the 2009 default foreclosure judgment for fraud. Rather, Phoenix first raised its fraud theory in its motion for summary judgment.

{14} The district court granted summary judgment to Aurora and MERS. The district court determined that Phoenix's suit was a collateral attack by a party in privity with or a successor-in-interest to Hood. The district court also concluded that the 2009 district court had jurisdiction over Aurora's foreclosure action, that the district court's default foreclosure judgment was therefore not void, and, accordingly, that Phoenix's claims were barred by res judicata. The district court declared that Aurora owned the property in fee and that all adverse claims of Phoenix and Hutchins were barred. The district court consequently held Phoenix's motion for summary judgment to be moot. Phoenix filed a timely notice of appeal.

{15} The Court of Appeals reversed the district court. Phoenix Funding, LLC v. Aurora Loan Servs., LLC , 2016–NMCA–010, ¶ 1, 365 P.3d 8, cert. granted2016–NMCERT–001, 370 P.3d 474. The Court first determined that judgments may be challenged collaterally "where the challenge is based on an asserted lack of jurisdiction" of the court that rendered the judgment. Id. ¶ 11. The Court then considered whether the 2009 district court had subject matter jurisdiction to render the default foreclosure judgment against Hood. Id. ¶¶ 14–28. The Court noted that, under Bank of New York v. Romero , a plaintiff's failure to establish standing to foreclose is a jurisdictional defect and that a plaintiff must demonstrate that it had the right to enforce a note at the time of filing suit in order to establish standing. Phoenix Funding , 2016–NMCA–010, ¶¶ 15, 21, 365 P.3d 8 (citing Bank of N.Y. , 2014–NMSC–007, ¶ 17, 320 P.3d 1 ). The Court of Appeals determined that Aurora did not present sufficient evidence to establish that it was the holder of the note at the time it filed suit. Phoenix Funding , 2016–NMCA–010, ¶ 20, 365 P.3d 8. The Court of Appeals, therefore, concluded that Aurora lacked standing to foreclose, which consequently deprived the 2009 district court of subject matter jurisdiction and voided the 2009 default foreclosure judgment against Hood. Id. ¶ 28. Because the Court of Appeals determined that the 2009 default foreclosure judgment was void, it held that Phoenix's claims against Aurora and MERS for declaratory judgment and quiet title were not barred by res judicata. Id. ¶ 30. Furthermore, because the Court of Appeals held that the 2009 default foreclosure judgment was void, it declined to rule on Phoenix's fraud argument. Id. ¶ 44.

{16} Aurora and MERS petitioned for a writ of certiorari. We granted the petition and issued the writ, exercising our jurisdiction under Article VI, Section 3 of the New Mexico Constitution and NMSA 1978, Section 34–5–14(B) (1972).

A. Standard of Review

{17} We review the district court's grant of summary judgment to Aurora and MERS de novo. See Encinias v. Whitener Law Firm, P.A. , 2013–NMSC–045, ¶ 6, 310 P.3d 611. In the summary judgment posture, we review the facts and make all reasonable inferences from the record in the light most favorable to the party opponent of the motion. Id. " ‘Summary judgment is appropriate where there are no genuine issues of material fact and the movant is entitled to judgment as a matter of law.’ " Id. (citation omitted); see also Rule 1–056(C) NMRA.

B. The 2009 Foreclosure Judgment Was Not Void for Lack of Jurisdiction
1. Because standing is a jurisdictional prerequisite only for causes...

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