Phoenix Funding, LLC v. Aurora Loan Servs., LLC, 390 P.3d 174

Background

In 2006 Kirsten Hood executed a promissory note and mortgage; the note was later transferred through securitization and ultimately to Aurora in January 2009.
Aurora filed a foreclosure complaint against Hood in March 2009 attaching an unindorsed copy of the note and a “Corporate Assignment of Mortgage”; Hood did not answer and the court entered default foreclosure judgment in October 2009; Aurora bought the property at the sale and the sale was confirmed in 2010.
In November 2011 Hood executed and recorded a quitclaim deed conveying the property to Gregory Hutchins, who then conveyed purported interests and encumbered them in favor of Phoenix Funding, LLC (Hutchins sole member of Phoenix).
Phoenix sued in 2012 seeking declaratory relief and quiet title, arguing Aurora lacked standing in the 2009 foreclosure (so the 2009 judgment was void) and later arguing Aurora procured the 2009 judgment by fraud based on the Corporate Assignment.
The district court granted summary judgment to Aurora and MERS, holding Phoenix’s suit was a collateral attack barred by res judicata and that the 2009 judgment was not void; the Court of Appeals reversed, holding Aurora lacked standing so the 2009 judgment was void; the Supreme Court granted certiorari.

Issues

Issue	Plaintiff's Argument	Defendant's Argument	Held
Whether the 2009 default foreclosure judgment was void for lack of jurisdiction because Aurora lacked standing	Phoenix: standing to foreclose is jurisdictional; Aurora lacked an indorsed note so the 2009 court had no jurisdiction and the judgment is void	Aurora: standing in an action to enforce a promissory note is a prudential (non‑jurisdictional) requirement; the district court had subject‑matter jurisdiction and the judgment is not void	Held: Standing in note‑enforcement/foreclosure actions is not a jurisdictional prerequisite; the 2009 judgment was not void for lack of jurisdiction
Whether Deutsche Bank precedent (standing not jurisdictional in foreclosure cases) applies to negotiable instruments	Phoenix: Deutsche Bank limited to nonnegotiable instruments; negotiable notes derive from UCC/statute so standing is jurisdictional	Aurora: Deutsche Bank involved a negotiable instrument and explains that enforcement actions originated at common law; Deutsche Bank applies here	Held: Deutsche Bank applies to negotiable instruments; enforcement actions existed at common law; standing is prudential not jurisdictional
Whether a later action may set aside the 2009 judgment for fraud when fraud was not pleaded in the complaint but raised in summary‑judgment briefs	Phoenix: Restatement (Second) of Judgments § 80 permits deciding relief when a prior judgment is relied upon in subsequent action	Aurora: Phoenix never pleaded an independent fraud claim to set aside the 2009 judgment; raising fraud in summary judgment was procedurally improper and prejudicial	Held: Phoenix’s fraud claim is procedurally barred because it was not pleaded or timely amended; the court instructs dismissal of the fraud claim

Key Cases Cited

Bank of New York v. Romero, 320 P.3d 1 (N.M. 2014) (failure to establish standing to foreclose identified as prudential issue in prior precedents cited by parties)
Deutsche Bank Nat’l Trust Co. v. Johnston, 369 P.3d 1046 (N.M. 2016) (holding standing in mortgage‑foreclosure actions is prudential, not jurisdictional)
Am. Fed. of State, Cty. & Mun. Emps. v. Bd. of Cty. Comm’rs of Bernalillo Cty., 373 P.3d 989 (N.M. 2016) (clarifying when statutory justiciability requirements are jurisdictional)
Barela v. Lopez, 417 P.2d 441 (N.M. 1966) (explaining direct vs. collateral attacks on judgments)
Sanders v. Estate of Sanders, 927 P.2d 23 (N.M. Ct. App. 1996) (discussing independent action to set aside judgments and Rule 1-060(B) procedure)
Apodaca v. Town of Tome Land Grant, 488 P.2d 105 (N.M. 1971) (noting earlier inconsistent terminology and classifying collateral attacks)
Bonds v. Joplin Heirs, 328 P.2d 597 (N.M. 1958) (upholding collateral attack where prior court lacked jurisdiction)
Heckathorn v. Heckathorn, 423 P.2d 410 (N.M. 1967) (historical formulation identifying jurisdiction of parties, subject matter, and power to decide)
Day v. Trigg, 204 P. 62 (N.M. 1922) (recognizing equity action to avoid judgment procured by false testimony / fraud)
United States v. Throckmorton, 98 U.S. 61 (U.S. 1878) (historical rule disfavoring setting aside judgments for alleged intrinsic fraud)