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

• Decision Date: 24 August 2015
• Docket Number: No. 33,211.,33,211.
• Citation: 365 P.3d 8
• Parties: PHOENIX FUNDING, LLC, Plaintiff–Appellant, v. AURORA LOAN SERVICES, LLC, and Mortgage Electronic Registration Systems, Inc., Defendants–Appellees.
• Court: Court of Appeals of New Mexico

365 P.3d 8

PHOENIX FUNDING, LLC, Plaintiff–Appellant,
v.
AURORA LOAN SERVICES, LLC, and Mortgage Electronic Registration Systems, Inc., Defendants–Appellees.

No. 33,211.

Court of Appeals of New Mexico.

Aug. 24, 2015.
Certiorari Granted, Jan. 19, 2016, No. S-1-SC-35512.

365 P.3d 10

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

Cavin & Ingram, P.A., Stephen D. Ingram, Albuquerque, NM, for Appellees.

OPINION

ZAMORA, Judge.

{1} Appellant Phoenix Funding, LLC (Phoenix) appeals from the district court's order granting summary judgment in favor of Appellees Aurora Loan Services, LLC (Aurora) and Mortgage Electronic Registration Systems, Inc. (MERS) (collectively Aurora). Phoenix filed suit to quiet title, challenging the validity of a default foreclosure judgment entered against its predecessor in interest, Kirsten Hood (Hood). The district court determined that Phoenix's suit constituted an improper collateral attack on the original judgment and that Phoenix's claims were barred by res judicata. We hold that a collateral attack on the original judgment by Phoenix was proper, and thus, res judicata does not operate to bar Phoenix's claims. We reverse and remand for further proceedings.

I. BACKGROUND

{2} In December 2006, Hood signed a promissory note with GreenPoint Mortgage Funding, Inc. (GreenPoint Funding) to purchase her Santa Fe home. To secure the note, Hood signed a mortgage contract with MERS as the nominee for GreenPoint Funding, which pledged her home as collateral for the loan.

{3} In March 2009, Aurora filed a complaint in the First Judicial District Court seeking foreclosure on Hood's home and claiming to be the holder of the note and mortgage with the right of enforcement. In October 2009, default judgment was entered against Hood. In November 2011 for "valuable consideration," Hood executed a quitclaim deed transferring her interest in the property to Gregory Hutchins (Hutchins), the sole member of Phoenix. Hutchins borrowed the money to purchase the property and mortgaged his interest in the property to Phoenix. Hutchins defaulted and Phoenix filed suit to foreclose Hutchins' interest in the property and to quiet title as to certain mortgage holders, including Aurora.

{4} Phoenix claimed that the Hood note and mortgage were never properly assigned to Aurora, and as a result, Aurora lacked standing to bring the original foreclosure action against Hood, therefore, the district court lacked subject matter jurisdiction over that action and its 2009 foreclosure judgment was void. Aurora moved for summary judgment claiming that Phoenix lacked standing to challenge that original foreclosure judgment, and that Phoenix's claims constituted an improper collateral attack that were barred by res judicata. Phoenix also moved

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for summary judgment reiterating its claim that the original judgment against Hood was void based on lack of standing and subject matter jurisdiction. Phoenix also argued, for the first time, that the judgment was void because Aurora had fraudulently assigned the Hood mortgage to itself.

{5} The district court found that it had jurisdiction over the original foreclosure action, that Phoenix, as a party in privity with and/or a successor-in-interest to Hood, was bound by the original foreclosure judgment under the doctrine of res judicata, and as a result Phoenix was precluded from collaterally attacking the original foreclosure judgment. The district court granted summary judgment in favor of Aurora and concluded that Phoenix's motion for summary judgment was moot.

II. DISCUSSION

{6} On appeal, Phoenix argues that the district court erred in granting summary judgment and in determining that its claims are barred by res judicata. Phoenix renews its argument that because Aurora lacked standing to bring the foreclosure action, that the district court therefore lacked jurisdiction to hear the case, and as a result, the original foreclosure judgment is void. Aurora contends that Phoenix lacks standing to challenge the original foreclosure judgment because it was not a party to the original foreclosure action and took its interest in the subject property after the foreclosure judgment was rendered. Aurora further argues that the grant of summary judgment was proper and that Phoenix's claims are precluded under the doctrine of res judicata.

A. Summary Judgment Standard of Review

{7} "We review the district court's decision to grant summary judgment de novo." Hydro Res. Corp. v. Gray, 2007–NMSC–061, ¶ 14, 143 N.M. 142, 173 P.3d 749. Summary judgment is appropriate where the facts are undisputed, "and the movant is entitled to judgment as a matter of law." Id. (internal quotation marks and citation omitted). Generally, New Mexico courts view summary judgment with disfavor. Romero v. Philip Morris Inc., 2010–NMSC–035, ¶ 8, 148 N.M. 713, 242 P.3d 280. We review the facts and make all reasonable inferences from the record in favor of the nonmoving party. T.H. McElvain Oil & Gas Ltd. P'ship v. Benson–Montin–Greer Drilling Corp., 2015–NMCA–004, ¶ 19, 340 P.3d 1277, cert. granted, 2014–NMCERT–012, 344 P.3d 988.

B. Under New Mexico Law Judgments Rendered by a Court Lacking Jurisdiction Are Void

{8} The New Mexico Supreme Court has distinguished between judgments rendered in error, judgments that can be set aside, and judgments rendered without authority which are null and void. State v. Patten, 1937–NMSC–034, ¶ 26, 41 N.M. 395, 69 P.2d 931 ("Where a court has jurisdiction, it has a right to decide every question which occurs in the cause ... [b]ut if it act[s] without authority, its judgments and orders are regarded as nullities; they are not voidable, but simply void." (internal quotation marks and citation omitted)). Judgments void for lack of jurisdiction have no legal effect. See In re Field's Estate, 1936–NMSC–060, ¶ 11, 40 N.M. 423, 60 P.2d 945 ("There are three jurisdictional essentials necessary to the validity of every judgment, to wit, jurisdiction of parties, jurisdiction of the subject matter, and power or authority to decide the particular matters presented and the lack of either is fatal to the judgment[.]" (citations omitted)); see also Heckathorn v. Heckathorn, 1967–NMSC–017, ¶ 10, 77 N.M. 369, 423 P.2d 410 (same). Concerning void judgments, our Supreme Court has stated:

A judgment void upon its face and requiring only an inspection of the record to demonstrate its invalidity is a mere nullity, in legal effect no judgment at all, conferring no right and affording no justification. Nothing can be acquired or lost by it; it neither bestows nor extinguishes any right, and may be successfully assailed whenever it is offered as the foundation for the assertion of any claim or title. It neither binds nor bars anyone. All acts performed under it and all claims flowing out of it are void. The parties attempting to enforce it

365 P.3d 12

may be responsible as trespassers. The purchaser at a sale by virtue of its authority finds himself without title and without redress. No action upon the part of the plaintiff, no inaction upon the part of the defendant, no resulting equity in the hands of third persons, no power residing in any legislative or other department of the government, can invest it with any of the elements of power or of vitality. It does not terminate or discontinue the action in which it is entered, nor merge the cause of action; and it therefore cannot prevent the plaintiff from proceeding to obtain a valid judgment upon the same cause, either in the action in which the void judgment was entered or in some other action. The fact that the void judgment has been affirmed on review in an appellate court or an order or judgment renewing or reviving it entered adds nothing to its validity. Such a judgment has been characterized as a dead limb upon the judicial tree, which may be chopped off at any time, capable of bearing no fruit to plaintiff but constituting a constant menace to defendant.

Walls v. Erupcion Mining Co., 1931–NMSC–052, ¶ 6, 36 N.M. 15, 6 P.2d 1021 (internal quotation marks and citation omitted).

C. A Judgment's Validity Can Be Challenged by a Successor in Interest in a Subsequent Action

{9} New Mexico courts characterize attacks on void judgments as either "direct" or "collateral." Barela v. Lopez, 1966–NMSC–163, ¶¶ 4–5, 76 N.M. 632, 417 P.2d 441.

A direct attack ... is an attempt to avoid or correct [the judgment] in some manner provided by law and in a proceeding instituted for that very purpose, in the same action and in the same court[. Whereas,] a collateral attack is an attempt to impeach the judgment by matters dehors the record, in an action other than that in which it was rendered; an attempt to avoid, defeat, or evade it, or deny its force and effect, in some incidental proceeding not provided by law for the express purpose of attacking it[.]

Id. ¶ 5 (internal quotation marks and citations omitted). "In other words, if the action or proceeding has an independent purpose and contemplates some other relief...