Reynolds v. Landau

• Decision Date: 21 April 2020
• Docket Number: No. A-1-CA-37135,A-1-CA-37135
• Citation: 468 P.3d 928
• Parties: Jack Willis REYNOLDS and Mary Louise Reynolds Revocable Trust Agreement, Plaintiff-Appellee, v. Stephen D. LANDAU, Defendant-Appellant, and Doug Bishop and B.E.I. Inc., Defendants.
• Court: Court of Appeals of New Mexico

468 P.3d 928

Jack Willis REYNOLDS and Mary Louise Reynolds Revocable Trust Agreement, Plaintiff-Appellee,

v. Stephen D. LANDAU, Defendant-Appellant,andDoug Bishop and B.E.I. Inc., Defendants.

No. A-1-CA-37135

Court of Appeals of New Mexico.

Filing Date: April 21, 2020

Mason & Isaacson, P.A. Patrick T. Mason Gallup, NM for Appellee

Stephen D. Landau, Santa Fe, NM Pro Se Appellant

MEDINA, Judge.

{1} This case arises out of an action to foreclose on a mortgage that predated the purchase of the property by a third party in a tax deed sale. The purchaser of the property, Stephen Landau, appeals the district court's judgment on the merits and order for foreclosure sale in favor of the mortgagee, the Jack Willis Reynolds and Mary Louise Reynolds Revocable Trust Agreement (the Trust). Landau, appealing pro se, raises the following issues: (1) the Trust should not be able to foreclose on a mortgage ten years after the mortgagor had its corporate status administratively cancelled; (2) the Trust's foreclosure action was barred by the statute of limitations; (3) the Trust's agreement to extend the mortgage and corresponding promissory note discharged the mortgagor's debt; (4) the district court's findings were not supported by substantial evidence; (5) the district court abused its discretion in setting trial less than a month after the close of discovery, as well as striking Landau's motion for summary judgment as untimely; (6) the district court erroneously based its judgment on issues of equity relating to the rental income Landau made off of the property; and (7) cumulative error deprived Landau of a fair trial. We affirm.

BACKGROUND

{2} On June 7, 2007, B.E.I., Inc. (BEI), a business corporation wholly owned and controlled by Doug Bishop,¹ executed a promissory note (the Note) in the principal sum of $115,000 made payable to the Trust. The Note required monthly payments of $1,200, with the remaining balance of $71,800 plus interest due on June 25, 2010. On June 25, 2007, BEI executed a mortgage (the Mortgage) on a parcel of land (the Property) it owned in McKinley County in favor of the Trust to secure the Note—including any extensions of the Note. The Note and the Mortgage were recorded together in the McKinley County Clerk's Office on June 28, 2007.

{3} Approximately one year before BEI executed the Note and Mortgage, the Office of the Public Regulation Commission (the Commission) sent BEI a notice informing it of its failure to file its annual corporate report required by the Corporate Reports Act, NMSA 1978, §§ 53-5-1 to -9 (1959, as amended through 2018). On July 21, 2007—approximately one month after BEI executed the Note and Mortgage—the Commission cancelled BEI's certificate of incorporation for failure to file the required corporate reports.² See § 53-5-7(A) (providing, in relevant part, that a corporation "shall have its certificate of incorporation canceled" for failure to file annual corporate report within sixty days of receiving notice that report is past due).

{4} On March 3, 2008, Bishop executed a personal guaranty to further secure BEI's obligations under the Note and Mortgage. Bishop made some payments on the Note but failed to pay off the remaining balance before the Note matured on June 25, 2010. Bishop also failed to pay the property taxes on the Property, resulting in the attachment of a tax lien on January 1, 2011.

{5} On March 3, 2011, the Trust sent Bishop a letter (the First Extension Letter) stating, "Pursuant to our several telecons, by copy of this letter I am informing [the escrow agent hired to collect payments due under the Note] to extend our Promissory Note [and] Mortgage to October 25, 2011." On August 20, 2011, the Trust sent Bishop a second letter (the Second Extension Letter) stating, "Pursuant to our telephone conversation on August 17, 2011[,] we agreed to again extend our Promissory Note [and] Mortgage to October 25, 2012." Unlike the First Extension Letter, Bishop signed the Second Extension Letter, indicating his agreement to the extension.

{6} Bishop continued to make sporadic payments after agreeing to the extension but did not pay off the remaining balance of the Note, which had accrued to approximately $90,000 by 2016. On July 22, 2016, the New Mexico Department of Taxation and Revenue (the Department) sold the Property for approximately $6,000 at public auction to Landau—a third party. Following the sale, the Department delivered to Landau a deed to the Property "convey[ing] ... all of the former property owner's interest in the ... [P]roperty ...as of the date the [S]tate's lien for real property taxes arose ... subject only to perfected interests in the real property existing before the date the property tax lien arose[.]"

{7} On August 18, 2016, Landau succeeded in a quiet title action against BEI and Bishop. The Trust filed the instant action on March 13, 2017 against BEI, Bishop, and Landau, seeking to collect the remaining balance of the Note and to foreclose on the Mortgage. Only Landau, acting pro se,³ responded to the suit. The district court held a Rule 1-016 NMRA scheduling conference on August 29, 2017, and scheduled a bench trial for November 8, 2017. The court also initially set the discovery deadline for October 1, 2017, but extended the deadline to October 15 upon Landau's request. The court did not set any other deadlines or enter a scheduling order.

{8} Landau filed a motion for summary judgment on November 3, 2017, arguing the Trust could not foreclose on the Mortgage because: (1) BEI's corporate status was cancelled almost ten years prior to the suit, and thus the survival period to bring suit against the corporation had expired; (2) Bishop discharged BEI's debt by agreeing to the extensions on behalf of himself personally; and (3) the six-year statute of limitations for foreclosing on the Mortgage had run and the extension letters were insufficient to revive the limitations period because neither was notarized or recorded, as required by NMSA 1978, Section 37-1-16 (1957).

{9} The Trust moved to strike Landau's motion as untimely. On November 8, 2017, the district court granted the Trust's motion to strike, and the case proceeded to trial as scheduled. The only witnesses to testify were Landau and Brad Reynolds, the successor trustee to the Trust, neither of whom had any first-hand knowledge of the Trust's dealings with BEI and Bishop.

{10} The district court ruled from the bench in the Trust's favor "as a matter of law and equity," ordered foreclosure and sale of the Property, and asked the Trust to prepare an order reflecting the court's judgment. On November 17, 2017, Landau filed a request for findings of fact and conclusions of law pursuant to Rule 1-052 NMRA, which included his proposed findings and conclusions. The district court did not rule on Landau's request but approved the form of order submitted by the Trust three days later, which included findings of fact and conclusions of law.⁴ The court's findings and conclusions did not include any of the ones submitted by Landau. On November 20, 2017, the district court as relevant to this appeal, concluded that the Trust was not barred from suing BEI for foreclosure because New Mexico's survival statute for business corporations, NMSA 1978, § 53-16-24 (1967), did not contain an express time limit for filing suit against a dissolved corporation.

{11} The court further concluded that the Trust's foreclosure action was timely because: (1) Bishop and BEI entered into a "valid agreement in writing to defer the payment of the full amount due under the Mortgage and Note to October 25, 2012, thus tolling the statute of limitations[, pursuant to NMSA 1978, Section 37-1-3(A) (2015);]" and (2) the continued payments on the Note revived the statute of limitations pursuant to Section 37-1-16. The court ordered the Mortgage foreclosed and appointed a special master to conduct a foreclosure sale of the Property to pay off the remaining balance of the Note, reserving jurisdiction to render a deficiency judgment against Bishop and BEI. The court denied Landau's motion to reconsider, [2 RP 274] and this appeal followed.

DISCUSSION

{12} Before we address Landau's arguments, a brief background on the tax deed sale process is useful. New Mexico's Property Tax Code (the Code) provides that, with certain exceptions not applicable to this case, "taxes on real property are a lien against the real property from January 1 of the tax year for which the taxes are imposed ... [and] ... continues until the taxes and any penalty and interest are paid." NMSA 1978, § 7-38-48 (2003). The Department may seize and sell real property to satisfy a tax delinquency on the property three years following the date the taxes first became delinquent. See NMSA 1978, § 7-38-65(A) (2013). In order to do this, the Department must first satisfy certain notice requirements and list the property at a public auction. See NMSA 1978, § 7-38-66 (2018) (identifying notice requirements); NMSA 1978, § 7-38-67(C) (2005) (requiring property to be sold at a public auction).

{13} Prior to the auction, the Department must set a minimum purchase price, which it determines by considering "the value of the property owner's interest in the real property, the amount of all delinquent taxes, penalties and interest for which it is being sold and the costs." Section 7-38-67(E). Often times, the minimum purchase price is set significantly below the property's fair market value. See, e.g. , Cochrell v. Mitchell , 2003-NMCA-094, ¶¶ 3, 5, 134 N.M. 180, 75 P.3d 396 (setting minimum bid at $4,000 on property worth between $100,000 and $144,000); see also Valenzuela v. Snyder , 2014-NMCA-061, ¶ 17, 326 P.3d 1120 (setting minimum bid at $215 on property worth $25,000). One of the reasons for this is that "the purchaser at the tax sale buys, knowing the uncertainty of the title which is reflected in the purchaser's offer." Valenzuela , 2014-NMCA-061, ¶ 23, 326 P.3d 1120 (alterations,...