Phoenix Funding, LLC v. Aurora Loan Services, LLC, 2017 NMSC 10

Background

In 2006 Kirsten Hood executed a promissory note secured by a MERS mortgage; the note was pooled into securitized transfers and ultimately assigned to Aurora in 2009.
Aurora sued Hood for foreclosure in March 2009, attaching an unendorsed copy of the note and a “Corporate Assignment of Mortgage”; Hood defaulted, the court entered default judgment and a special master sale in 2009, and Aurora acquired the property.
In 2011 Gregory Hutchins obtained a quitclaim deed from Hood and then transferred the property (and encumbered it) in transactions that led to Phoenix Funding (Hutchins’ LLC) suing in 2012 to quiet title and to challenge the 2009 foreclosure judgment.
Phoenix alleged the 2009 judgment was void because Aurora lacked standing (it did not attach an endorsed note) and later asserted in summary judgment that the Corporate Assignment was fraudulent and thus the 2009 judgment should be set aside for fraud.
The district court granted summary judgment to Aurora, holding Phoenix’s suit was a collateral attack barred by res judicata and that the 2009 court had jurisdiction; the Court of Appeals reversed, holding the 2009 judgment void for lack of standing; the Supreme Court granted certiorari.

Issues

Issue	Plaintiff's Argument (Phoenix)	Defendant's Argument (Aurora/MERS)	Held
Whether the 2009 foreclosure judgment is void for lack of jurisdiction because Aurora lacked standing	Aurora lacked the right to enforce the note at filing (no endorsed note attached), so prior court lacked subject-matter jurisdiction	Standing in foreclosure is prudential, not jurisdictional for common-law note enforcement; the 2009 court had subject-matter jurisdiction	The 2009 judgment was not void for lack of jurisdiction; standing is not jurisdictional here
Whether Deutsche Bank decision is limited to nonnegotiable instruments so it does not apply	Deutsche Bank should be limited to nonnegotiable instruments; negotiable notes are statutory and thus standing is jurisdictional	Deutsche Bank involved a negotiable instrument and confirms note-enforcement actions originate in common law; Deutsche Bank applies to negotiable notes	Deutsche Bank applies; actions to enforce negotiable instruments arose at common law, so standing is prudential
Whether lack of standing deprives the court of 'power or authority to decide the matter' distinct from subject-matter jurisdiction	Even if not jurisdictional, lack of standing removes the court’s power/authority and renders the judgment void	Power/authority is not distinct from subject-matter jurisdiction; prior formulations refer to statutory prerequisites only	The "power or authority" concept is not distinct from subject-matter jurisdiction and does not render the judgment void here
Whether Phoenix may set aside the 2009 judgment for fraud in its 2012 action	The Corporate Assignment was fraudulent and Phoenix may collaterally attack the 2009 judgment for fraud in the 2012 suit	Phoenix did not plead an independent fraud claim and raised fraud for the first time in summary judgment; relief-for-fraud claims must be timely and properly pleaded	Phoenix’s fraud claim is procedurally barred (it must have been pleaded/amended earlier); court reinstated district court summary judgment and dismissed the fraud claim

Key Cases Cited

Bank of N.Y. v. Romero, 320 P.3d 1 (N.M. 2014) (standing to enforce note must exist at time of filing; discussed as prudential in later cases)
Deutsche Bank Nat’l Trust Co. v. Johnston, 369 P.3d 1046 (N.M. 2016) (holding standing in note-foreclosure cases 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) (clarifies when justiciability prerequisites are jurisdictional under statutory causes of action)
Barela v. Lopez, 417 P.2d 441 (N.M. 1966) (defines direct vs. collateral attacks on judgments)
Sanders v. Estate of Sanders, 927 P.2d 23 (N.M. Ct. App. 1996) (independent actions and Rule 60 procedural limits on collateral attacks)
Heckathorn v. Heckathorn, 423 P.2d 410 (N.M. 1967) (historical formulation listing jurisdiction of parties, subject matter, and power to decide)
Day v. Trigg, 204 P. 62 (N.M. 1922) (equity action lies to avoid judgment procured by fraud)
United States v. Throckmorton, 98 U.S. 61 (U.S. 1878) (federal precedent on setting aside judgments for fraud)
Heimann v. Adee, 924 P.2d 1352 (N.M. 1996) (recognizes declaratory relief as a collateral attack for jurisdictional voidness)
Chavez v. Cty. of Valencia, 521 P.2d 1154 (N.M. 1974) (collateral attacks on void judgments may be brought long after entry)