Bank of America v. Roybal ( 2017 )

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1 IN THE COURT OF APPEALS OF THE STATE OF NEW MEXICO
2 BANK OF AMERICA, N.A.,
3 Plaintiff-Appellee,
4 v. NO. 34,567
5 JEROME T. ROYBAL, and
6 AMY J. ROYBAL,
7 Defendants-Appellants.
8 APPEAL FROM THE DISTRICT COURT OF SANTA FE COUNTY
9 Raymond Z. Ortiz, District Judge
10 Weinstein & Riley, P.S.
11 Jason Bousliman
12 Albuquerque, NM
13 for Appellee
14 Gleason Law Firm, LLC
15 Deirdre Gleason
16 Heath, MA
17 for Appellants
18 MEMORANDUM OPINION
19 VANZI, Chief Judge.
1 {1} Husband and wife, Jerome Roybal and Amy Roybal (Homeowners), appeal
2 from the district court’s order denying their motion to vacate a foreclosure judgment
3 due to the foreclosing bank’s, Bank of America (BOA), lack of standing. This appeal
4 implicates a recent New Mexico Supreme Court case that clarified that a party who
5 fails to challenge standing prior to the completion of a trial on the merits or while
6 litigation is still active waives his standing arguments. See Deutsche Bank Nat’l Tr.
7 Co. v. Johnston, 2016-NMSC-013, ¶¶ 15-19, 369 P.3d 1046. Given this clarification,
8 we affirm the district court and hold that Homeowners waived their right to challenge
9 BOA’s standing because service was proper and they did not raise their standing
10 challenge prior to the district court’s entry of the final judgment. Because resolution
11 of this issue is dispositive of this appeal, we need not reach the other issues raised by
12 Homeowners.
13 BACKGROUND
14 {2} BOA filed a foreclosure complaint against Homeowners, and after three failed
15 attempts at personal service, the district court granted BOA leave to complete service
16 by posting and required the posting to be followed by a first class mailing of the
17 summons and complaint. Homeowners made no appearance nor did they answer the
18 summons and complaint, and the district court granted BOA a default judgment. BOA
19 then purchased the foreclosed property at a special master’s sale.
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1 {3} Subsequently, Homeowners filed a motion to reinstate the case, alleging that
2 they were never served with any of the documents filed in the case, including the
3 foreclosure complaint. Homeowners additionally alleged that BOA failed to establish
4 its standing because the promissory note attached to the foreclosure complaint did not
5 contain a special indorsement indicating that BOA was the holder at the time the
6 complaint was filed. Homeowners also filed a motion to vacate the default judgment
7 and foreclosure sale and dismiss for lack of subject matter jurisdiction, which the
8 district court denied. This appeal followed.
9 DISCUSSION
10 {4} This case turns on whether Homeowners properly raised the issue of BOA’s
11 standing after entry of the default judgment. “We review the district court’s denial of
12 a motion to set aside a default judgment for abuse of discretion.” Ortiz v. Shaw, 2008-
13 NMCA-136, ¶ 12, 145 N.M. 58, 193 P.3d 605. Homeowners argue that the default
14 judgment should be set aside under Rule 1-060(B) NMRA because they did not have
15 the opportunity to raise the standing issue prior to entry of the default judgment since
16 they were improperly served under Rule 1-004(F) NMRA. In light of our Supreme
17 Court’s recent holding in Johnston, however, we hold that under the facts of this case,
18 Homeowners were properly served under Rule 1-004 and, as a result, the district court
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1 did not err when it also ruled that Homeowners waived any standing arguments by
2 failing to raise them before the entry of the default judgment.
3 Service Was Proper Under Rule 1-004
4 {5} As a preliminary matter, we address the question of whether Homeowners were
5 properly served with the summons and complaint. We defer to the district court’s
6 findings of fact when its findings are supported by substantial evidence. See Bank of
7 N.Y. v. Romero, 2014-NMSC-007, ¶ 18, 320 P.3d 1 (explaining that an appellate court
8 reviews a district court’s findings of fact for substantial evidence). “Substantial
9 evidence means relevant evidence that a reasonable mind could accept as adequate to
10 support a conclusion.” Id. (internal quotation marks and citation omitted). On appeal,
11 the appellate courts “resolve all disputed facts and indulge all reasonable inferences
12 in favor of the trial court’s findings.” Id. (internal quotation marks and citation
13 omitted). Under Rule 1-004(F)(1),
14 [p]ersonal service of process shall be made upon an individual by
15 delivering a copy of a summons and complaint or other process . . . to the
16 individual personally; or if the individual refuses to accept service, by
17 leaving the process at the location where the individual has been found;
18 and if the individual refuses to receive such copies or permit them to be
19 left, such action shall constitute valid service; or . . . by mail or
20 commercial courier service.
4
1 However, Rule 1-004(J) provides that, where it has been shown by affidavit that
2 service cannot otherwise be reasonably made under Rule 1-004, a moving party may
3 seek leave of the court to effect service “by any method or combination of methods
4 . . . that is reasonably calculated under all of the circumstances to apprise the
5 defendant of the existence and pendency of the action and afford a reasonable
6 opportunity to appear and defend.”
7 {6} Here, BOA attempted to personally serve Homeowners with the summons and
8 complaint at Homeowners’ residence on three separate occasions. In his affidavit of
9 attempted service, the process server stated that he first attempted to serve
10 Homeowners on August 13, 2013, at 10:45 a.m., but that there was no answer, so he
11 left a note on their door. On that date, he verified with a neighbor that Homeowners
12 lived at that address. On August 15, 2013, the process server attempted service again
13 at 2:00 p.m. and again received no response. He verified with a different neighbor that
14 Homeowners lived at that address. Noticing that the first note had been removed from
15 the door, the process server left a card taped to the garage door. The process server
16 made a third attempt to serve Homeowners on August 19, 2013 at 6:00 p.m. Despite
17 “several times ringing the doorbell, knocking and calling out ‘Hello[,]’ ” there was no
18 response even though the garage door was open and two vehicles registered to
19 Homeowners were parked in the garage. The process server testified to the same
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1 effect. On August 22, 2013, BOA filed a motion with the district court for leave to
2 effect personal service of process by posting pursuant to Rule 1-004(J). The district
3 court granted leave for BOA to serve the summons and complaint for foreclosure by
4 posting it at Homeowners’ residence, followed by a first class mailing of the summons
5 and complaint to that address. In compliance with the court’s order, the process server
6 posted two copies of the summons and complaint along with the district court’s order
7 “in the most public part of [Homeowners’] premises,” while BOA mailed the same
8 documents along with a copy of the certificate of mailing to Homeowners’ address via
9 first class mail.
10 {7} Homeowners allege that they were never served with any of the documents filed
11 in the case, including the foreclosure complaint. Homeowners provided affidavits to
12 the district court stating that they never received the posting of the foreclosure
13 complaint. Further, Homeowners stated that they were both working when the process
14 server attempted service the first two instances and that on the third occasion, they
15 were likely out for their regular evening walk. Finally, Homeowners alleged that they
16 did not receive the complaint by mail or posting.
17 {8} The district court denied Homeowners’ motion to vacate default judgment and
18 foreclosure sale and dismiss for lack of jurisdiction because it found that the process
19 server’s testimony and affidavits were credible and that Homeowners were properly
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1 served by posting. In addition, the district court found that Homeowners had
2 attempted to deliberately avoid service. We defer to the court’s factual findings and
3 conclude that they were supported by substantial evidence as established by the
4 process server’s affidavits and testimony. See Romero, 2014-NMSC-007, ¶ 18; Perez
5 v. Int’l Minerals & Chem. Corp., 1981-NMCA-022, ¶ 13, 95 N.M. 628, 624 P.2d 10256 (“We will not weigh the evidence or determine the credibility of witnesses [as t]he
7 trier of facts is the sole judge of the credibility of witnesses and the weight to be given
8 their testimony.” (internal quotation marks omitted)). Accordingly, we hold that
9 service was proper and that Homeowners had an opportunity, but failed, to file a
10 responsive pleading raising their standing challenge before entry of the default
11 judgment.
12 Homeowners Waived Their Rule 1-060(B) Standing Arguments
13 {9} In Johnston,1 our Supreme Court clarified New Mexico law on whether
14 standing is jurisdictional. The Court explained that,
1
19 We acknowledge Homeowners’ supplemental brief in chief, which addresses
20 the Johnston case. We note, however, that while the supplemental brief accurately
21 reflects our Supreme Court’s statement that prudential standing is a “vital procedural
22 safeguard,” see Johnston, 2016-NMSC-013, ¶ 21, Homeowners did not address the
23 Court’s emphasis on “active litigation” and subsequent discussion clarifying that “a
24 final judgment from a cause of action that may have lacked standing . . . is not
25 voidable under Rule 1-060(B) due to a lack of prudential standing.” See Johnston,
26 2016-NMSC-013, ¶¶ 18, 33-34.
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1 [a]s a general rule, standing in our courts is not derived from the state
2 constitution, and is not jurisdictional. However, when a statute creates a
3 cause of action and designates who may sue, the issue of standing
4 becomes interwoven with that of subject matter jurisdiction. Standing
5 then becomes a jurisdictional prerequisite to an action. . . . [W]e take this
6 opportunity to clarify . . . and hold that mortgage foreclosure actions are
7 not created by statute. Therefore, the issue of standing in those cases
8 cannot be jurisdictional.
9 Johnston, 2016-NMSC-013, ¶ 11 (alteration, internal quotation marks, and citations
10 omitted). Johnston further explained that, because a cause of action to enforce a
11 promissory note is not created by statute, standing is not jurisdictional in such a case.
12 Id. ¶ 10; see also id. ¶ 12 (stating that “an action to enforce a promissory note fell
13 within the district court’s general subject matter jurisdiction . . . because it was not
14 created by statute”). Accordingly, standing in foreclosure cases is a prudential
15 consideration that “can be raised for the first time at any point in an active
16 litigation[.]” Id. ¶¶ 10, 18. Our Supreme Court went on to hold that “standing must be
17 established as of the time of filing suit in mortgage foreclosure cases[.]” Id. ¶ 20. It
18 nevertheless stated that, because standing is not jurisdictional, the possibility remains
19 that a homeowner can waive the issue. Id. ¶ 15.
20 {10} Moreover and important to our analysis here, Johnston held that “a final
21 judgment on any . . . cause of action [other than one that lacks standing as a
22 jurisdictional matter], including an action to enforce a promissory note . . . is not
23 voidable under Rule 1-060(B) due to a lack of prudential standing.” Johnston, 2016-
8
1 NMSC-013, ¶ 34 (emphasis added). Because a default judgment necessarily precludes
2 trial and is a final order thus ending “active litigation,” see Gallegos v. Franklin,
3 1976-NMCA-019, ¶ 25, 89 N.M. 118, 547 P.2d 1160, in the present case, the final
4 judgment granting BOA default judgment is not voidable under Rule 1-060(B) due
5 to a lack of prudential standing. See Gallegos, 1976-NMCA-019, ¶ 25 (noting that a
6 default judgment is a final judgment).
7 {11} In Johnston, the Court held that the homeowner did not waive standing because
8 he raised the issue during “active litigation,” i.e., in a motion prior to trial. 2016-
9 NMSC-013, ¶¶ 17-18. In contrast, in this case, Homeowners filed their first motion
10 challenging BOA’s standing over two months after the default judgment was entered,
11 and they filed the motion to vacate the default judgment and foreclosure sale because
12 of BOA’s alleged lack of standing ten months after the entry of the default judgment.
13 Based on the record before us, service was proper and Homeowners had ample
14 opportunity to raise the issue of standing before entry of the default judgment. Yet
15 Homeowners did not challenge BOA’s standing until months after “active litigation”
16 was complete. Consequently, under Johnston, they waived their right to do so. See id.17 ¶¶ 15-19. The district court did not abuse its discretion in denying Homeowners’ Rule
18 1-060(B) motion to vacate the default judgment and foreclosure sale in this case.
19 CONCLUSION
9
1 {12} We affirm.
2 {13} IT IS SO ORDERED.
3 __________________________________
4 LINDA M. VANZI, Chief Judge
5 WE CONCUR:
6 _________________________________
7 JAMES J. WECHSLER, Judge
8 _________________________________
9 TIMOTHY L. GARCIA, Judge
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