Pub. 13 2016 Issue 2

O V E R A C E N T U R Y : B U I L D I N G B E T T E R B A N K S - H E L P I N G N E W M E X I C O R E A L I Z E D R E A M S 16 A Date with Your Indorsement We Thought the UCC was Enough. In February, 2014, the New Mexico Supreme Court, in Bank of New York v. Romero, 1 concluded that the lender in that foreclosure action did not have standing because it could not prove that it was authorized, either as the holder or as the trans- feree, to enforce the note at the time the case was filed. In that case, the Court relied on the Uniform Commercial Code (UCC) in examining the ways in which a party can enforce a note, recognizing that the holder of a note may establish standing by pro- ducing evidence that it was entitled to enforce the note under the UCC. Bank of New York failed to prove it was entitled to enforce the note as required by the UCC at the time it filed its foreclosure action and lost its case. The NewMexico Supreme Court was again faced with the question of a lender’s right to enforce a note in Deutsche Bank National Trust Co., as Trustee for Morgan Stanley ABS Capital 1 Inc. Trust 2006-NC4 v. Johnny Lance Johnston. 2 In this foreclosure action, the borrower refinanced his home with a loan from New Century Mortgage Corporation. The note toNewCentury was secured by a mortgage on the borrower’s property in Las Cruces. The borrower defaulted on his loan pay- ments beginning in August 2008. On February 24, 2009, Deutsche Bank filed a complaint for foreclosure. Deutsche Bank attached two exhibits to its complaint: (1) a January 31, 2006 promissory note made payable to New Cen- tury which did not contain an indorsement; and (2) a January 31, 2006mortgage on the borrower’s property recorded on February 7, 2006 by New Century. In its complaint, Deutsche Bank alleged that it owned the mortgage through assignment and was a holder in due course of the note. The Borrower “acknowledge[d]” this allegation in his answer to Deutsche Bank’s complaint. The borrower later filed a motion to dismiss the case for lack of standing, alleging that Deutsche Bank did not prove ownership of the note or pro- vide any other evidence that it was the holder of the note at the time it filed its complaint for foreclo- sure. Deutsche Bank’s response to this motion to dismiss included a copy of an assignment of mort- gage dated February 7, 2006 (the same date as the original mortgage), but recorded on December 9, 2009, in an attempt to prove it held the note at the time it filed its complaint for foreclosure. At trial, Deutsche Bank introduced a version of the note that was indorsed in blank by New Cen- tury and testimony by a litigation specialist for the loan servicing company that, because the note was indorsed in blank, Deutsche Bank was the holder of the note and could act as the lender on the note. The district court agreed that Deutsche Bank was the current holder of the note and found that the COUNSELOR’S CORNER The court ultimately agreed with the Court of Appeals and reversed the district court’s decision in favor of Deutsche Bank and affi rmed the Court of Appeals’ decision. DEBBIE RAMIREZ MODRALL SPERLING LAW FIRM