Rabo Agrifinance, Inc. v. Terra XXI, Ltd.

• Decision Date: 25 June 2014
• Docket Number: No. 34,891.,32,697.,34,891.
• Citation: 336 P.3d 972
• Court: Court of Appeals of New Mexico
• Parties: RABO AGRIFINANCE, INC., Successor in Interest to Farm Credit Bank of Texas, Plaintiff–Appellee, v. TERRA XXI, LTD., a Texas Limited Partnership, composed of Veigel Cattle Company, as General Partner; Robert Wayne Veigel, a/k/a Bob W. Veigel; Ella Marie Williams Vogel, a/k/a Ella Marie Veigel; Veigel Cattle Company, a Texas corporation; Veigel Farm Partners, a Texas general partnership d/b/a Veigel Partners; Bob Veigel, Inc., a Texas corporation; Steve Veigel, Inc., a Texas corporation; Veigel–Kirk, Inc., a Texas corporation; Vicki Veigel, Inc., a Texas corporation; Veigel Farms, Inc., a Texas corporation; Terra Partners, a Texas general partnership; Burnett & Veigel, Inc., a Texas corporation, as general partner of Terra Partnership, a Texas general partnership; and, All Unknown Claimants of Interest in the Premises Adverse to the Plaintiff, Defendants–Appellants.

336 P.3d 972

RABO AGRIFINANCE, INC., Successor in Interest to Farm Credit Bank of Texas, Plaintiff–Appellee

v.TERRA XXI, LTD., a Texas Limited Partnership, composed of Veigel Cattle Company, as General Partner; Robert Wayne Veigel, a/k/a Bob W. Veigel; Ella Marie Williams Vogel, a/k/a Ella Marie Veigel; Veigel Cattle Company, a Texas corporation; Veigel Farm Partners, a Texas general partnership d/b/a Veigel Partners; Bob Veigel, Inc., a Texas corporation; Steve Veigel, Inc., a Texas corporation; Veigel–Kirk, Inc., a Texas corporation; Vicki Veigel, Inc., a Texas corporation; Veigel Farms, Inc., a Texas corporation; Terra Partners, a Texas general partnership; Burnett & Veigel, Inc., a Texas corporation, as general partner of Terra Partnership, a Texas general partnership; and, All Unknown Claimants of Interest in the Premises Adverse to the Plaintiff, Defendants–Appellants.

32,697.

No. 34,891.

Court of Appeals of New Mexico.

June 25, 2014.

Certiorari Denied, Oct. 8, 2014,

Rowley Law Firm, L.L.C., Richard F. Rowley, II, Richard F. Rowley, III, Clovis, NM, for Appellee.

Keleher & McLeod, P.A., Thomas C. Bird, James L. Rasmussen, Justin B. Breen, Albuquerque, NM, for Appellants.

OPINION

FRY, Judge.

{1} Defendants, collectively referred to as Terra throughout this Opinion, appeal the district court's orders granting summary judgment in favor of Plaintiff¹ in a mortgage foreclosure proceeding and denying their motion under Rule 1–060(B)(5) NMRA for relief from the judgment. Terra argues that the district court erred in applying the after-acquired title doctrine and in denying their post-judgment motion under Rule 1–060(B)(5), arguing that the judgment has been satisfied. Because we disagree with Terra, we affirm.

BACKGROUND

{2} This is the second time this case has been before this Court, and we reiterate the basic facts underlying this suit from the first opinion. Rabo Agrifinance, Inc. v. Terra XXI, Ltd., 2012–NMCA–038, 274 P.3d 127. Plaintiff is the holder of two promissory notes secured by a mortgage covering property located in Quay and Guadalupe Counties, New Mexico (the New Mexico property) and a deed of trust covering land in Deaf Smith County, Texas. Id. ¶ 2. At the time Terra granted the mortgage, it owned an undivided fifty percent interest in the New Mexico property. Id. Five years later, Terra received a warranty deed to the New Mexico property that effectively gave it a 100 percent ownership interest in the property. Id. In 2005, Plaintiff successfully sued in federal court to collect on the amounts due on the promissory notes. Id. ¶ 3. Plaintiff subsequently brought suit in New Mexico to confirm the judgment entered against Terra and sought to foreclose the mortgage on the New Mexico property to the full extent of Terra's 100 percent interest on the basis of the after-acquired title doctrine.Id. ¶ 4. “The common law doctrine of after-acquired title is one under which title to land subsequently acquired by a grantor who previously attempted to convey title to the same land, which he then did not own, completely and automatically inures to the benefit of his prior grantee.” Hays v. King, 1989–NMSC–078, ¶ 8, 109 N.M. 202, 784 P.2d 21.

{3} In the first appeal, we reversed the district court's ruling in favor of Terra that the doctrine of after-acquired title did not apply in this case. We held that “as a general matter, the after-acquired title doctrine can be applied in New Mexico in favor of a mortgagee of property based on mortgage covenants unless particular circumstances warrant non-application.” Rabo Agrifinance, Inc., 2012–NMCA–038, ¶ 18, 274 P.3d 127. Because the mortgage purported to convey Terra's interest in the New Mexico property “with mortgage covenants,” id. ¶ 7 (internal quotation marks omitted), we remanded to the district court for further proceedings regarding the application of the after-acquired title doctrine to the facts of this case. Id. ¶ 18.

{4} On remand, the district court applied the after-acquired title doctrine and concluded that because Terra granted the mortgage at issue “with mortgage covenants,” it is estopped from claiming that the mortgage did not attach to the entire property when Terra subsequently obtained a 100 percent interest. Because Terra was estopped to claim that the mortgage did not attach to the entire New Mexico property, the district court granted summary judgment in favor of Plaintiff.

{5} Following the entry of summary judgment, Terra sought to conduct further discovery on the issue of whether land in Texas that was also used to secure the mortgage had been sold, and, if so, whether the proceeds of the alleged sale satisfied the judgment. Terra ultimately filed a motion for relief from the judgment under Rule 1–060(B)(5), arguing that the judgment had indeed been satisfied because Plaintiff allegedly received sufficient funds in the sale of the Texas property to satisfy its judgment against Terra. The district court denied Terra's motion, and Terra now appeals.

DISCUSSION

I. After–Acquired Title Doctrine

{6} In arguing that the district court erred in applying the after-acquired title doctrine, Terra makes three main contentions. Terra argues that (1) the after-acquired title doctrine is limited by the extent of the grantor's conveyance, (2) the mortgage covenants did not expand the interest Terra purported to convey, and (3) the district court mistakenly focused on Plaintiff's intent in its application of the after-acquired title doctrine. We address these contentions in two parts. First, we group Terra's first two arguments into the basic determination of what Terra purported to convey in the mortgage. Second, we determine whether the district court improperly considered the Plaintiff's intent in applying the doctrine.

A. Terra Purported to Convey a 100 Percent Interest in the Property

{7} As a general matter, we take no issue with Terra's argument that application of the after-acquired title doctrine is limited by the extent of the grantor's conveyance. As noted above, the doctrine “estops a grantor who obtains title to land after already granting the land from claiming the land as against the grantee.” Rendleman v. Heinley, 2007–NMCA–009, ¶ 3, 140 N.M. 912, 149 P.3d 1009. “A grantor who executes a deed purporting to convey land to which he has no title or to which he has a defective title at the time of the conveyance will not be permitted, when he afterward acquires good title to the land, to claim in opposition to his deed as against the grantee [.]”Hays, 1989–NMSC–078, ¶ 9, 109 N.M. 202, 784 P.2d 21 (internal quotation marks and citation omitted). Terra's argument is therefore correct to the extent that if it did not purport to convey a 100 percent interest in the property, the after-acquired title doctrine could not benefit Plaintiff. See Rendleman, 2007–NMCA–009, ¶ 18, 140 N.M. 912, 149 P.3d 1009 (explaining that the after-acquired title doctrine did not apply in another case “because there had been no attempt by the grantor to convey the property in question to one of the parties”). Thus, the threshold issue before us is what Terra purported to convey in the mortgage documents. We review this issue de novo. Id. ¶ 14 (“Whether the doctrine of after-acquired title applies is a question of law, which we review de novo.”).

{8} Terra argues that it did not purport to convey a 100 percent interest in the property because it only purported to convey its “interest in and to” the New Mexico property in the mortgage. Terra likens this language to a quitclaim deed, to which the after-acquired title doctrine is likely inapplicable. See Hays, 1989–NMSC–078, ¶ 5, 109 N.M. 202, 784 P.2d 21 (“[The plaintiff cites] as authority ... cases supporting the propositions that a quitclaim deed vests only the title held by the grantor at the time of the conveyance, and that the after-acquired title doctrine does not apply to one claiming title under a quitclaim deed.... [W]e have no quarrel with the substance of these cited authorities[.]”). Terra further argues that language in the mortgage stating that Terra granted, mortgaged, and conveyed its interest in and to the New Mexico property “with mortgage covenants” does not operate to enlarge the interest purportedly conveyed by the mortgage. For the reasons stated below, we conclude that the grant of the mortgage “with mortgage covenants” purported to convey a 100 percent interest in the property and that the district court therefore properly applied the after-acquired title doctrine.

{9} As an initial matter, we reject Defendants' invitation to view language in the mortgage as analogous to a quitclaim deed so as to preclude application of the after-acquired title doctrine. “[A]n essential characteristic of a quitclaim deed is that it contains no warranties or covenants by the grantor.” R & R Land Dev., L.L.C. v. Am. Freightways, Inc., 389 S.W.3d 234, 242 (Mo.Ct.App.2012) ; see 23 Am.Jur.2d Deeds § 10 (2014). The mortgage in this case was explicitly granted “with mortgage covenants” as well as with a litany of further “representations, warranties, and covenants.” We thus conclude that any similarity between the “my interest in and to” language in this mortgage and language often found in quitclaim deeds ends at a purely semantic level.

{10} Furthermore, the phrase “mortgage covenants” has a specific, statutorily defined meaning in New Mexico. NMSA 1978, Section 47–1–40 (1947) states that the use of “mortgage covenants” in a mortgage is construed to mean that “the mortgagor ... covenants with the mortgagee ... that he is lawfully seized in fee simple of the granted premises; that they are free from all encumbrances; that the mortgagor has good right to sell and convey the same; and that he will ... warrant and defend the same to the mortgagee ... forever against the lawful claims and demands of all persons.” (emphasis added) (internal quotation marks omitted). We therefore construe “with mortgage covenants” as covenanting the...