BOA v. Quintana ( 2012 )

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1 IN THE COURT OF APPEALS OF THE STATE OF NEW MEXICO
2 BANK OF AMERICA, NATIONAL
3 ASSOCIATION, AS SUCCESSOR BY
4 MERGER TO LASALLE BANK
5 NATIONAL ASSOCIATION, AS
6 TRUSTEE FOR MERRILL LYNCH
7 FIRST FRANKLIN MORTGAGE
8 LOAN TRUST, MORTGAGE LOAN
9 ASSET-BACKED CERTIFICATES,
10 SERIES 2007-2,
11 Plaintiff-Appellee,
12 v. NO. 30,354
13 ERASMO QUINTANA, if living;
14 if deceased, THE ESTATE OF
15 ERASMO QUINTANA, Deceased;
16 MORTGAGE ELECTRONIC
17 REGISTRATION SYSTEMS, INC.,
18 AS NOMINEE,
19 Defendants,
20 and
21 GRACE QUINTANA,
22 Defendant-Appellant.
23 APPEAL FROM THE DISTRICT COURT OF BERNALILLO COUNTY
24 Valerie A. Huling, District Judge
25 Susan C. Little & Associates, P.A.
1 Karen Howden Weaver
2 Albuquerque, NM
3 for Appellees
4 United South Broadway Corp.
5 Erin O. Anderson
6 Albuquerque, NM
7 for Appellant
8 MEMORANDUM OPINION
9 FRY, Judge.
10 When Defendant Grace Quintana was unable to make her mortgage payments
11 after her husband died, Plaintiff Bank of America (Bank), the successor to the original
12 lending institution, sued to collect on the note and to foreclose on the mortgage. The
13 district court granted summary judgment to Bank, and Mrs. Quintana appeals. We
14 hold that Mrs. Quintana failed to present evidence that would create an issue of fact
15 warranting a trial. We therefore affirm.
16 BACKGROUND
17 On February 27, 2007, Mrs. Quintana and her husband executed a promissory
18 note payable to lender First Franklin Financial Corp. (First Franklin Financial). The
19 note had an adjustable interest rate ranging from 6.9 percent, initially, to 12.9 percent,
20 and it provided for a balloon payment on the note’s maturity date, April 1, 2037. The
21 note was secured by a mortgage on the Quintanas’ home. The mortgage provided that
22 First Franklin Financial was the lender and that Mortgage Electronic Registration
2
1 Systems, Inc. (MERS) was “a separate corporation that is acting solely as a nominee
2 for [l]ender and [l]ender’s successors and assigns.” MERS was the mortgagee under
3 the mortgage. The loan’s proceeds paid off an existing mortgage for the Quintanas
4 and provided them with cash in the amount of $11,773.70.
5 Documents in the record show that on January 29, 2009, MERS, as nominee for
6 First Franklin Financial, assigned the mortgage to LaSalle Bank National Association
7 (LaSalle), as trustee for Merrill Lynch First Franklin Mortgage Loan Trust. The
8 assignment expressly states that the assignment was “effective the 5th day of M[arch]
9 2007.” LaSalle merged with Bank, effective October 17, 2008.
10 Approximately one month after the Quintanas signed the note and the mortgage,
11 Mr. Quintana died. Following Mr. Quintana’s death, Mrs. Quintana made the
12 mortgage payments until October 2008. The last payment she made on the note was
13 on October 8, 2008. On December 2, 2008, First Franklin Loan Services, which was
14 the loan servicing entity and not the same as First Franklin Financial, the initial lender,
15 sent a letter to Mr. and Mrs. Quintana stating that the account was past due and that
16 “[t]his arrearage constitutes a breach of your mortgage note obligation.” The letter
17 went on to state that the Quintanas had until January 1, 2009, to bring the account
18 current and that failure to do so would lead to acceleration of the note’s due date and
19 initiation of foreclosure proceedings.
20 Having received no further payments, LaSalle, the mortgage’s assignee, filed
21 a complaint for foreclosure against the Quintanas on January 29, 2009. Before Mrs.
22 Quintana filed an answer, a first amended complaint was filed showing Bank, as
3
1 successor by merger to LaSalle, as Plaintiff. Mrs. Quintana answered and raised the
2 following as defenses: (1) Bank was not the real party in interest and (2) the mortgage
3 note violated the Home Loan Protection Act (HLPA).
4 Bank ultimately filed a motion for summary judgment and default in which it
5 sought judgment in the amount of the note’s net principal balance, plus interest, costs
6 of collection, attorney fees, and a judgment of foreclosure on the property. Following
7 a hearing, the district court asked the parties for additional briefing. The court then
8 entered summary judgment in favor of Bank and against Mrs. Quintana. This appeal
9 followed.
10 DISCUSSION
11 Mrs. Quintana makes five arguments in support of her contention that summary
12 judgment was improper, which we consolidate into four issues: (1) whether there are
13 issues of fact related to Bank’s right to enforce the note and mortgage, (2) whether
14 Bank is a holder in due course of the note, (3) whether the district court improperly
15 failed to consider her defenses based on HLPA and the Unfair Practices Act (UPA),
16 and (4) whether there are genuine issues of fact regarding Mrs. Quintana’s application
17 for relief under the federal Home Affordable Modification Program (HAMP) and
18 regarding Bank’s denial of loan modification.
19 “On appeal from the grant of summary judgment, we ordinarily review the
20 whole record in the light most favorable to the party opposing summary judgment to
21 determine if there is any evidence that places a genuine issue of material fact in
22 dispute.” City of Albuquerque v. BPLW Architects & Eng’rs, Inc., 2009-NMCA-081,
4
1 ¶ 7, 146 N.M. 717, 213 P.3d 1146. “However, if no material issues of fact are in
2 dispute and an appeal presents only a question of law, we apply de novo review and
3 are not required to view the appeal in the light most favorable to the party opposing
4 summary judgment.” Id.5 1. There Are No Issues of Fact Regarding Bank’s Right to Enforce the Note
6 and Mortgage
7 Mrs. Quintana claims that (1) Bank failed to prove its right to enforce the note
8 and (2) there are issues of fact regarding Bank’s right to enforce the mortgage. We
9 consider each of these arguments in turn.
10 a. Bank’s Right to Enforce the Note
11 Mrs. Quintana appears to contend that Bank proved only that it had possession
12 of the note and that mere possession was not enough to give Bank the right to enforce
13 the note. She also appears to argue that MERS’ allegedly flawed assignment of the
14 mortgage somehow negatively impacted Bank’s ability to enforce the note.
15 Therefore, we first consider the nature of the note and its relation to the mortgage.
16 There is no dispute that the note signed by the Quintanas is a negotiable
17 instrument. See NMSA 1978, § 55-3-104 (1992) (defining negotiable instrument).
18 In this case, the note as drafted was payable to the order of First Franklin Financial
19 and stated that the borrowers understood that First Franklin Financial could transfer
20 the note. The note also reflected two endorsements: one to the order of First Franklin
5
1 Financial and one from First Franklin Financial without a specific payee identified.
2 This second endorsement meant that the note was payable to the note’s bearer. See
3 NMSA 1978, § 55-3-109(a)(2) (1992) (stating that an order is payable to bearer if it
4 “does not state a payee”). Because Bank had possession of the note, Bank was the
5 holder of the note. See NMSA 1978, § 55-1-201(21)(A) (2005) (defining “holder” as
6 “the person in possession of a negotiable instrument that is payable . . . to bearer”).
7 Thus, Bank was entitled to enforce the note. NMSA 1978, § 55-3-301 (1992)
8 (“‘Person entitled to enforce’ an instrument means (i) the holder of the instrument.”).
9 Mrs. Quintana appears to concede that Bank is the holder of the note. However,
10 she seems to claim that only a holder in due course could enforce the note and that
11 Bank is not a holder in due course. Her argument is unavailing because the Uniform
12 Commercial Code clearly states that a holder may enforce a note. Section 55-3-301.
13 Later in this opinion we consider the question of whether Bank is a holder in due
14 course.
15 Bank’s status as the note’s holder meant that Bank could pursue Mrs. Quintana
16 for any amounts owing on the note. The note is separate from the mortgage, and the
17 mortgage serves as security for payment of the note. The mortgage specifically
18 references the note and states that it “secures to [First Franklin Financial]: (i) the
19 repayment of the [l]oan.” Therefore, if the assignment of the mortgage to Bank was
6
1 somehow flawed, as Mrs. Quintana contends, it had no effect on Bank’s ability to
2 enforce the note except to the extent that Bank would have no security from which to
3 seek payment. Absent the mortgage, Bank could still pursue Mrs. Quintana for
4 payment of the note. As a result, we conclude that Bank, by producing the bearer note
5 in its possession, proved that it had the right to enforce the note.
6 b. There Are No Issues of Fact Regarding Bank’s Right to Enforce the
7 Mortgage
8 We turn now to Mrs. Quintana’s arguments regarding the validity of the
9 mortgage assignment. The assignment of mortgage states that MERS, as nominee for
10 First Franklin Financial, assigned to LaSalle (which merged with Bank on October 17,
11 2008) the mortgage of February 27, 2007, executed by the Quintanas. The assignment
12 then states: “Witness its hand this 29th day of J[anuary] 2009, but effective the 5th
13 day of M[arch] 2007,” and it is signed on behalf of MERS by Krystal Hall, the
14 assistant secretary for assignments.
15 In questioning the validity of the mortgage assignment, Mrs. Quintana devotes
16 many pages of her brief in chief to a discussion of MERS and its role as nominee
17 under the mortgage. However, she ultimately states that she is “not challenging
18 MERS[’] authority to act as nominee which is clearly spelled out in the mortgage.”
19 Instead, Mrs. Quintana challenges “[K]rystal Hall’s authority to claim any rights other
7
1 than a bare transferee or straw man for the beneficial owner which appears to be
2 LaSalle.”
3 Bank produced the unanimous written consent of First Franklin Financial’s
4 board of directors granting certain employees of Security Connections, Inc. (SCI),
5 including Krystal Hall, “all authority necessary to lawfully and properly prepare,
6 execute, witness, attest and deliver assignments . . . and such other documents that will
7 enable SCI to effect the transfer . . . of [First Franklin Financial’s] sale of mortgage-
8 secured loans.” Mrs. Quintana appears to argue that while this corporate resolution
9 may have given Hall the authority to assign a mortgage on behalf of First Franklin
10 Financial, it did not give her the authority to do so on behalf of MERS, which was the
11 entity conveying the assignment.
12 We are not persuaded. As Mrs. Quintana acknowledges, the mortgage itself
13 provided that MERS was the nominee for First Franklin Financial and its successors,
14 and it was the mortgagee. It further stated that MERS, as nominee for First Franklin
15 Financial and its successors, “holds only legal title to the interests granted by [the
16 Quintanas] . . . , but, if necessary to comply with law or custom” it also had the right
17 “to exercise any or all of those interests, including, but not limited to, the right to
18 foreclose . . . and to take any action required of [First Franklin Financial].” These
19 provisions gave MERS the right to assign the mortgage on behalf of First Franklin
8
1 Financial, and the corporate resolution gave Krystal Hall the right to do the same.
2 Mrs. Quintana has not offered any evidence suggesting any impropriety in Hall’s
3 acting through MERS to execute the mortgage assignment. See Schwartzman v.
4 Schwartzman Packing Co., 99 N.M. 436, 441, 659 P.2d 888, 893 (1983) (“A party
5 opposing a motion for summary judgment must make an affirmative showing by
6 affidavit or other admissible evidence that there is a genuine issue of material fact
7 once a prima facie showing is made by the movant.”). Both Hall and MERS, acting
8 together, had the authority to assign the mortgage on behalf of First Franklin
9 Financial.
10 Mrs. Quintana also seems to challenge the validity of the retroactive effective
11 date stated in the assignment. In support, Mrs. Quintana relies on a New York case
12 and an Ohio case holding that an entity that is assigned a mortgage after a foreclosure
13 action is filed does not have standing to pursue the foreclosure action. See
14 Countrywide Home Loans v. Gress, 888 N.Y.S.2d 914, 914-15 (N.Y. App. Div. 2009);
15 Wells Fargo Bank, N.A. v. Byrd, 178 Ohio App. 3d 285, 2008-Ohio-4603, 897 N.E.2d
16 722, ¶ 16.
17 Mrs. Quintana’s argument fails because the factual scenario presented in the
18 New York and Ohio cases does not exist in the present case. The document assigning
19 the mortgage to LaSalle was dated January 29, 2009, with an effective date of March
9
1 5, 2007. LaSalle had merged with Bank on October 17, 2008. Thus, on the date the
2 original complaint was filed, January 29, 2009, Bank (in accordance with its merger
3 with LaSalle) was the mortgagee, even without reference to the retroactive effective
4 date of the assignment. The first amended complaint, naming Bank as plaintiff instead
5 of LaSalle, was filed on March 5, 2009, which was also after the mortgage was
6 assigned to LaSalle, and LaSalle had already merged with Bank.
7 2. Whether Bank Is a Holder in Due Course
8 If Bank holds the note as a holder in due course, Mrs. Quintana is statutorily
9 precluded from asserting certain defenses to Bank’s enforcement of the note. See
10 NMSA 1978, § 55-3-302 (1992) (defining holder in due course); see also NMSA
11 1978, § 55-3-305(b) (2009) (stating that a holder in due course seeking to enforce an
12 obligation is subject only to defenses enumerated in Subsection 55-3-305(a)(1) and
13 is not subject to other specific defenses). Mrs. Quintana argues that Bank is not a
14 holder in due course of the note and, therefore, that the note is subject to the defenses
15 Mrs. Quintana raised under the HLPA and the UPA.
16 As we have discussed, Bank is the holder of the note. In order to establish that
17 it is a holder in due course, Bank must show that it took the note “(i) for value, (ii) in
18 good faith, (iii) without notice that the instrument is overdue or has been dishonored,”
19 and without notice of other circumstances that are not applicable here. Section 55-3-
10
1 302(a)(2). Mrs. Quintana claims that there is an issue of fact regarding whether Bank
2 knew or should have known that the note was in default when it took possession of
3 the note.
4 Mrs. Quintana assumes that the note was transferred from First Franklin
5 Financial to Bank at the same time the mortgage was assigned to Bank (via LaSalle,
6 which merged with Bank on October 17, 2008)—January 29, 2009. If she is correct,
7 then Bank acquired the note after First Franklin Loan Services sent the demand letter
8 to the Quintanas in December 2008. Bank counters that the note was transferred to
9 it soon after the Quintanas signed it in February 2007, and the effective date stated on
10 the mortgage assignment, March 5, 2007, seems to support this view. While there is
11 nothing on the note indicating when Bank came into possession, Bank submitted the
12 affidavit of Steven Baranet, the vice president of Bank’s servicing agent, who attested
13 that Bank “took the [n]ote for value in good faith and without any notice that it was
14 overdue or had been dishonored or of any defenses against it.” Thus, this affidavit is
15 prima facie evidence of the elements of holder-in-due-course status.
16 Mrs. Quintana contends that Baranet’s affidavit was inadmissible because it was
17 not based on personal knowledge about the practices of First Franklin Financial. We
18 fail to see how this has any bearing on Bank’s status as a holder in due course. The
19 critical information is what Bank knew about the note when it took possession, not the
11
1 practices of First Franklin Financial. Baranet attested that he was employed by
2 Bank’s servicing agent and that his affidavit was based on his personal knowledge
3 about the records of the regularly conducted business activity related to the property,
4 note, and mortgage at issue in this case. Unless Mrs. Quintana produced some
5 evidence calling these sworn statements into question, and there is no indication that
6 she did, the district court could properly rely on them in the context of Bank’s
7 summary judgment motion. See Roth v. Thompson, 113 N.M. 331, 334-35, 825 P.2d
8 1241, 1244-45 (1992) (explaining that “[t]he movant need only make a prima facie
9 showing that he is entitled to summary judgment” whereupon “the burden shifts to the
10 party opposing the motion to demonstrate the existence of specific evidentiary facts
11 which would require trial on the merits”).
12 Mrs. Quintana also mentions issues of fact regarding a written request for a
13 breakout of fees and costs that she sent in April 2009, apparently to the loan servicer,
14 First Franklin Loan Services. She maintains that Bank disputed having received the
15 letter and that it produced its own printout of transactions on the account. We do not
16 understand how this dispute bears on the issues in this case. Again, if Mrs. Quintana
17 had a basis for disputing the printout Bank produced, then it was her obligation to
18 produce evidence supporting her contentions. See Dow v. Chilili Coop. Ass’n, 105
19 N.M. 52, 54-55, 728 P.2d 462, 464-65 (1986) (explaining that a party opposing
12
1 summary judgment may not simply argue that evidentiary facts requiring a trial on the
2 merits may exist). She did not do so.
3 In summary, there are no disputed issues of fact concerning Bank’s status as a
4 holder in due course. Bank produced prima facie evidence establishing the elements
5 of that status, and Mrs. Quintana did not produce any evidence creating a dispute. See
6 Schwartzman, 99 N.M. at 441, 659 P.2d at 893 (stating that “[a] party opposing a
7 motion for summary judgment must make an affirmative showing by affidavit or other
8 admissible evidence that there is a genuine issue of material fact once a prima facie
9 showing is made by the movant”).
10 3. The Bank’s Status as a Holder in Due Course Shields it from Defenses
11 under the HLPA and the UPA
12 Mrs. Quintana argues that the district court improperly failed to consider her
13 defenses under the HLPA and the UPA. However, she acknowledges that holder-in-
14 due-course status would shield Bank from these defenses. We agree. Mrs. Quintana’s
15 contentions relate to the conduct of the initial lender, First Franklin Financial, and a
16 holder in due course is not subject to defenses that can be asserted against the note’s
17 original payee. See § 55-3-305(a)(2)-(3), (b) (stating that a holder in due course is not
18 subject to “a defense of the obligor . . . that would be available if the person entitled
19 to enforce the instrument were enforcing a right to payment under a simple contract”
20 or a defense of “a claim in recoupment of the obligor against the original payee of the
13
1 instrument if the claim arose from the transaction that gave rise to the instrument”);
2 see also Cadle Co. v. Wallach Concrete, Inc., 120 N.M. 56, 59, 897 P.2d 1104, 1107
3 (1995) (stating that “[a] holder in due course of a negotiable instrument takes the
4 instrument free from any personal defense or claim that the maker may assert”).
5 Therefore, because we have held that Bank made a prima facie showing of its status
6 as a holder in due course, we need not address Mrs. Quintana’s claims under the
7 HLPA and the UPA.
8 4. There Are No Issues of Fact Regarding the HAMP and Loan Modification
9 Applications
10 Mrs. Quintana contends that there were issues of fact regarding her applications
11 for loan modification that precluded summary judgment. In support of her claims and
12 in opposition to Bank’s motion for summary judgment, Mrs. Quintana offered only
13 one item of evidence in the district court, which was her affidavit. In her affidavit, she
14 attested that she “would like to enter into a loan modification agreement based on
15 [her] fixed income” and that she had first contacted the lender about such a
16 modification after her husband’s death in 2007. She “continued paying for as long as
17 [she] could” but she “no longer had any money and they told [her] they couldn’t do
18 anything for [her].” She recited her health problems and her desire to stay in her
19 home. Mrs. Quintana did not submit any other evidence regarding her applications
20 for a loan modification.
14
1 Bank submitted evidence of telephone logs, which are fairly cryptic. However,
2 it appears that Bank and Mrs. Quintana had several telephone discussions regarding
3 possible loan modifications beginning in February 2008. Bank also submitted two
4 letters from First Franklin Loan Services to Mrs. Quintana. The first one, dated
5 September 25, 2009, notified Mrs. Quintana that she did not meet one or more
6 eligibility requirements for a HAMP modification. Apparently, First Franklin Loan
7 Services was supposed to checkmark which eligibility requirement(s) Mrs. Quintana
8 did not meet, but none of the items were checked. The second letter, dated October
9 15, 2009, notified Mrs. Quintana that her request for a loan modification was denied
10 because “[c]urrent income does not support modified mortgage payment.”
11 It appears that Mrs. Quintana raised her desire for a loan modification in an
12 effort to obtain equitable relief from the district court. We question whether the
13 desire for equitable relief constitutes a viable defense to Bank’s claims for
14 enforcement of the note and foreclosure. However, even if we assume that an
15 equitable remedy was available to her, Mrs. Quintana did not provide the district court
16 with any evidence on which to base relief. There is nothing in the record to refute
17 Bank’s contention that Mrs. Quintana does not have sufficient income to pay even a
18 modified loan. Indeed, Mrs. Quintana’s attorney acknowledged at the summary
19 judgment hearing that Mrs. Quintana’s only income is Social Security disability
15
1 income and that her income is not increasing. As a result, the only evidence in the
2 record makes a prima facie showing that Mrs. Quintana does not qualify for a loan
3 modification. There is no countervailing evidence creating an issue of fact. See Cates
4 v. Regents of N.M. Inst. of Mining & Tech., 1998-NMSC-002, ¶ 9, 124 N.M. 633, 954
5 P.2d 65 (explaining that summary judgment is proper where there is no evidence
6 raising a reasonable doubt that a genuine issue of material fact exists).
7 In summary, we recognize that harsh lending practices by some financial
8 entities have imposed hardships on consumers, although we express no opinion about
9 whether the loan made to the Quintanas reflects those harsh practices. We also
10 appreciate the difficulties suffered by Mrs. Quintana as the result of her husband’s
11 apparently unexpected death. Our sympathy for Mrs. Quintana notwithstanding, the
12 fact remains that Bank established a prima facie case that it was entitled to enforce the
13 note and foreclose on the mortgage, and Mrs. Quintana did not counter with evidence
14 giving rise to disputed issues of fact. The district court properly granted Bank
15 summary judgment.
16 CONCLUSION
17 We affirm the district court’s judgment.
18 IT IS SO ORDERED.
16
1
2 CYNTHIA A. FRY, Judge
3 WE CONCUR:
4
5 CELIA FOY CASTILLO, Chief Judge
6
7 J. MILES HANISEE, Judge
17