1

Certiorari Denied, March 7, 2012, No. 33,449

IN THE COURT OF APPEALS OF THE STATE OF NEW MEXICO

Opinion Number: 2012-NMCA-038

Filing Date: January 12, 2012

Docket No. 30,286

RABO AGRIFINANCE, INC.,

Successor in Interest to Farm

Credit Bank of Texas,

Plaintiff-Appellant/Cross-Appellee,

v.

TERRA XXI, LTD., a Texas limited partnership,

composed of VEIGEL CATTLE CO., as general

partner; ROBERT WAYNE VEIGEL, a/k/a BOB

W. VEIGEL; ELLA MARIE WILLIAMS VOGEL,

a/k/a ELLA MARIE VEIGEL; VEIGEL CATTLE

CO., a Texas corporation; VEIGEL FARM PARTNERS,

a Texas general partnership, d/b/a VEIGEL PARTNERS;

BOB VIEGEL, INC., a Texas corporation, STEVE 

VEIGEL, INC., a Texas corporation; VEIGEL-KIRK,

INC., a Texas corporation; VICKI VEIGEL, INC., a Texas

corporation; VEIGEL FARMS, INC., a Texas corporation;

TERRA PARTNERS, a Texas general partnership; BURNETT

& VEIGEL, INC., a Texas corporation, as general partner of

Terra Partnership, a Texas general partnership; and ALL

UNKNOWN CLAIMANTS OF INTEREST IN THE PREMISES

ADVERSE TO THE PLAINTIFF,

Defendants-Appellees/Cross-Appellants.

APPEAL FROM THE DISTRICT COURT OF QUAY COUNTY

Drew D. Tatum, District Judge

Rowley Law Firm, L.L.C.

Richard F. Rowley II

Richard F. Rowley III

Clovis, NM
 1 Rabo was successor-in-interest to a number of entities, starting with Farm Credit Bank of

Texas (Farm Credit), the mortgagee in the 1994 loan transactions. 

2

for Appellant

Garrett Law Firm, P.A.

Michael T. Garrett

Clovis, NM

for Appellees

OPINION

SUTIN, Judge.

{1} In its foreclosure action, a mortgagee sought to enlarge its mortgage lien from a 50%

interest to a 100% interest based on the doctrine of after-acquired title. The district court

held against the mortgagee. The court also dismissed counterclaims. We hold that the court

erred in granting summary judgment, and we remand for further proceedings on the issue of

the applicability of the after-acquired title doctrine in circumstances in which a mortgage

contains mortgage covenants. And we hold that the counterclaimants failed to preserve their

cross-appeal issues.

BACKGROUND

{2} Plaintiff Rabo Agrifinance, Inc. (Rabo) held two 1994 promissory notes (the notes)

secured by a 1994 first mortgage (the mortgage) covering property located in Quay and

Guadalupe Counties, New Mexico (the property).1

 The mortgage was recorded in both Quay

and Guadalupe Counties. When it granted the mortgage, Defendant Terra XXI, Ltd. (Terra),

a Texas limited partnership, owned an undivided 50% interest in the property. In 1999 Terra

received a warranty deed to the property that effectively placed in Terra a 100% ownership

interest in the property. 

{3} In December 2005, Rabo sued in the United States District Court in Texas to collect

amounts due on the notes (the Texas suit). The federal district court entered summary

judgment in October 2006 in favor of Rabo for a total amount prior to interest, costs, and

attorney fees, of $3,958,577.97, and the judgment was affirmed by the Fifth Circuit Court

of Appeals in December 2007. See Rabo Agrifinance, Inc. v. Terra XXI Ltd., 2006 WL

2828748 (N.D. Tex. 2006), aff’d 257 Fed. Appx. 732, 2007 WL 4305378 (5th Cir. 2007)

(per curiam). Rabo domesticated the Texas suit judgment in New Mexico in December

2006, and in January 2007, Rabo recorded transcripts of the judgment in Quay and

Guadalupe Counties.
 2

 On May 13, 1999, the Estate of Stephen Samuel Williams (the Estate of Williams)

conveyed its 50% ownership interest in the property to the Williams Testamentary Trust.

On June 8, 1999, the Williams Testamentary Trust conveyed that same 50% interest to Terra.

On November 1, 2006, effective September 12, 2006, Terra conveyed that same interest to

Terra Partners, a Texas general partnership (Terra Partners).

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{4} Before us now is Rabo’s suit against Terra and others (Defendants) filed in August

2007 in New Mexico district court asking that the $3,958,577.97 judgment awarded in the

Texas suit on the 1994 notes (less a $200,000 credit) be confirmed and seeking foreclosure

of the mortgage covering the property. Defendants filed counterclaims in five counts: Count

I (failure to act in good faith), Count II (prima facie tort), Count III (mortgages

extinguished), Count IV (civil conspiracy), and Count V (quiet title and foreclosure).

Summary judgment proceedings concluded with the district court confirming the judgment

amount and, after determining that Rabo “ha[d] a first mortgage lien on an undivided 50%

interest” and that “[a]s a matter of law, the doctrine of after-acquired title is inapplicable to

this matter, and [Rabo] does not have a 100% mortgage lien interest[,]” the district court

entered summary judgment in favor of Rabo on its first mortgage lien interest as to an

undivided 50% interest in the property. With respect to Defendants’ counterclaims, the court

held that “[r]es judicata and collateral estoppel bar the counterclaims of . . . Defendants[]

and, as such, no genuine issues of material fact exist as to Defendants’ counterclaims[,]”

granted Rabo’s motion for summary judgment regarding the counterclaims, and dismissed

the same.

{5} Rabo asserts on appeal that the district court erred in granting it judgment consisting

of only a 50% mortgage lien interest in the property. We discuss Defendants’ cross-appeal

later in this Opinion. No party seeks reversal on the ground that a genuine issue of material

fact existed precluding summary judgment.

DISCUSSION

Rabo’s Appeal

{6} Rabo asserts that, under the doctrine of after-acquired title with its estoppel element,

the mortgage should have been foreclosed based on a 100% lien interest in the property.

Based on the nature of the district court’s ruling and undisputed facts, the issues before us

are legal ones that we review de novo. Barreras v. State Corr. Dep’t, 2003-NMCA-027, ¶ 5,

133 N.M. 313, 62 P.3d 770. 

{7} Rabo acknowledges that, at the time the mortgage was granted in 1994, Terra had

title to only 50% of the property. But Rabo points out that in 1999 Terra obtained a warranty

deed to the remaining 50% of the property from the Stephen Samuel Williams Testamentary

Trust (the Williams Testamentary Trust)2

 and that this remaining 50% enured to Rabo’s

benefit under the doctrines of after-acquired title and estoppel. Rabo’s claim to entitlement
 3

 Although not discussed by Rabo, we note two other pertinent sections, namely, NMSA

1978, Sections 47-1-39 (1947) and 47-1-44 (1975). Section 47-1-44 establishes

“[c]onveyancing forms[,]” including forms for a mortgage and a deed of trust. The form for

mortgages states that the grantor grants the real estate “with mortgage covenants.” Section

47-1-44(6). After setting out the effect of warranty and special warranty covenants in

conveyances of real estate in Section 47-1-37 and NMSA 1978, Section 47-1-38 (1947),

Section 47-1-39 discusses the effect of a “deed in substance” following the forms entitled

“mortgage” or “deed of trust[.]” Section 47-1-40 then sets out the meaning of “mortgage

covenants” in “a mortgage or deed of trust by way of mortgage of real estate.”

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to a 100% mortgage lien interest is rooted in the language in the mortgage stating that Terra

granted, mortgaged, and conveyed its interest in and to the property “with mortgage

covenants.” 

{8} Rabo explains that the meaning of “warranty covenants” in NMSA 1978, Section 47-

1-37 (1947), titled “[e]ffect of warranty covenants in conveyances[,]” is that the grantor of

real estate represents and agrees “‘that he is lawfully seized in fee simple of the granted

premises[,]’” that the premises are free of all encumbrances, and that he “‘shall warrant and

defend the [premises] to the grantee . . . forever against the lawful claims and demands of

all persons.’” Rabo then points to NMSA 1978, Section 47-1-40 (1947), titled

“[c]onstruction of ‘mortgage covenants[,]’” which reads:

In a mortgage or deed of trust by way of mortgage of real estate

“mortgage covenants” shall have the full force and meaning and effect of the

following words and shall be applied and construed accordingly: “the

mortgagor for himself, his heirs, executors, administrators[,] and successors,

covenants with the mortgagee and his heirs, successors[,] and assigns that he

is lawfully seized in fee simple of the granted premises; that they are free

from all encumbrances; that the mortgagor has good right to sell and convey

the same; and that he will, and his heirs, executors, administrators[,] and

successors shall, warrant and defend the same to the mortgagee and his heirs,

successors[,] and assigns forever against the lawful claims and demands of

all persons.”

Rabo asserts, based on Section 47-1-403

 and the similar language in Section 47-1-37, that

“with mortgage covenants” Terra represented and agreed that it was lawfully seized in fee

simple of the granted, mortgaged, and conveyed premises and that the property was free

from all encumbrances. Rabo further asserts that Terra warranted and agreed to defend

against the lawful claims and demands of all persons.

{9} Based on these circumstances, Rabo argues that Terra is estopped from asserting its

after-acquired 50% ownership interest in defense of Rabo’s pursuit of foreclosure on 100%

of the property. In support of its position, Rabo cites New Mexico’s mainstay after-acquired
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title case, Hays v. King, 109 N.M. 202, 784 P.2d 21 (1989), which states: “The common law

doctrine of after-acquired title is one under which title to land subsequently acquired by a

grantor who previously attempted to convey title to the same land, which he then did not

own, completely and automatically inures to the benefit of his prior grantee.” Id. at 204, 784

P.2d at 23. Recognizing, however, that no New Mexico case has directly addressed the issue

whether mortgage covenants in a mortgage covers an ownership interest in the property

“described in the mortgage that is acquired by the mortgagor after the execution of the

mortgage[,]” Rabo goes beyond Hays to out-of-state cases that Rabo contends support its

position. Cf. C & L Lumber & Supply, Inc. v. Tex. Am. Bank/Galeria, 110 N.M. 291, 298,

795 P.2d 502, 509 (1990) (“[A]lthough other jurisdictions have applied the doctrine of afteracquired title to cure defects in mortgages, the application of the doctrine to documents void

at the time of execution for failure to join both spouses has been rejected in New Mexico.”).

{10} Language in some of the cases cited by Rabo tends to support its position. For

example, the court in Tompkins State Bank v. Niles, 537 N.E.2d 274, 278 (Ill. 1989), stated:

“The after-acquired-title doctrine can be applied to mortgages as well as to conveyances by

warranty deed, when the mortgage instrument contains covenants of title. A mortgage which

contains the words “and warrants” has been held to be equivalent to a mortgage containing

all covenants of title.” (Citations omitted.) Also, in Alabama Home Mortg. Co. v. Harris,

582 So. 2d 1080, 1083 (Ala. 1991), the court stated: “[I]n their mortgage [the mortgagors]

warranted the title to the property that was conveyed by the mortgage. Because of these

warranties, any after-acquired interest of the [mortgagors] would pass to the [mortgagees],

as the [mortgagors] are estopped to deny the title of the [mortgagees].” 

{11} Terra points out that the after-acquired-title doctrine has not been applied in New

Mexico to mortgage interests and that New Mexico has not enacted an after-acquired-interest

statute as other states have done. Terra argues that the after-acquired-title doctrine set out

in Hays “is nothing more than an enforcement of the grantor’s obligation to deliver a good

title” and shows that Colorado’s after-acquired-interest statute was held inapplicable because

a deed of trust did not involve a transfer of title and “did not purport to convey an estate in

fee simple absolute.” Premier Bank v. Bd. of Cnty. Comm’rs, 214 P.3d 574, 577 (Colo. App.

2009) (internal quotation marks omitted). Terra also argues that, different from a

conveyance of title, a mortgage is personal property and is merely a lien, and it does not pass

title to the mortgaged property. In addition, Terra argues that the controlling language in the

mortgage is “all its interest in and to” the property, which at the time of the grant was only

50%, and that Terra could not encumber a property interest that was not its own. See Texas

Am. Bank/Levelland v. Morgan, 105 N.M. 416, 417, 733 P.2d 864, 865 (1987) (stating that

“jurisdictions [that] have decided this question . . . have uniformly agreed that one cotenant

may not encumber the other cotenant’s interest without consent” and that “a grantor can only

give that which he owns”). Finally, Terra argues that Rabo’s January 2007 transcribed

Texas suit judgment attached to the property only after Terra’s after-acquired 50% interest

had been conveyed by Terra to Terra Partners in November 2006. Thus, according to Terra,

Rabo’s judgment lien could have been effective only as to the interest still owned by Terra

in January 2007 and was not effective as to Terra Partner’s ownership interest acquired from
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Terra in November 2006. For the reasons that follow, we are not persuaded by Terra’s

arguments.

{12} First, Terra’s judgment lien priority theory holds no water. Rabo’s lien priority in

this case was based on foreclosure of its first mortgage, not a foreclosure of its judgment

lien. Second, we see no reason why, as a general rule, the after-acquired-title or -interest

doctrine cannot be applied when mortgage interests are involved and a mortgagor grants a

mortgage with “mortgage covenants” on property to which the mortgagor has a defect in its

title at the time of the grant of the mortgage but later acquires good title to the mortgaged

property. It appears that this general rule is well-established at common law. See, e.g., Orr

v. Stewart, 7 P. 693, 694 (Cal. 1885) (“It is . . . well settled that when a mortgage of land is

made, purporting to convey the land in fee, any title afterwards acquired by the mortgagor

will feed the mortgage and inure to the benefit of the mortgagee[.]”); Roderick v. McMeekin,

68 N.E. 473, 477 (Ill. 1903) (“It is well settled that, when one gives a mortgage upon land

to secure a debt, he is estopped by the recitals in his contract creating the lien from denying

his title to the mortgaged premises.” (internal quotation marks and citation omitted)); Decker

v. Caskey, 3 N.J. Eq. 446, 1836 WL 2149, *3 (N.J. Ch. 1836) (“If a mortgage be made of an

estate to which the mortgagor has not a good title, and then he who has the real title conveys

to the mortgagor . . . with a good title, the mortgagee will be entitled in equity to the benefit

of it[.]”); Weber v. Laidler, 66 P. 400, 401 (Wash. 1901) (“The principle is too well

established to call for discussion that, ordinarily, if one conveys or mortgages land to which

he has then no title, his after-acquired title will inure to the benefit of his grantee or

mortgagee.”); 4 Tiffany, Law of Real Property, ch. 29, § 1231, p. 1107-08 (3d ed. 1975)

(“The doctrine of . . . after-acquired title has been applied in the case of a mortgage as well

as in that of an absolute conveyance, more particularly when the mortgage instrument

contains a covenant of warranty or other covenant. . . . There appears to be no difference, as

regards the doctrine of estoppel, between the principles applicable to a mortgage and to an

absolute conveyance[.]”). See generally Annot., Nature of Conveyance or Covenants Which

Will Create Estoppel to Assert After-Acquired Title or Interest in Real Property, 58 A.L.R.

345, 354-58, 360-98, 422-28 (1929) (indicating that a mortgage with covenants of general

warranty and not intended as a quitclaim of an interest affords a basis for estoppel against

assertion of an after-acquired title or interest). Third, we reject Terra’s unsupported

argument that an after-acquired title theory cannot apply in jurisdictions, such as New

Mexico, in which a mortgage is considered a lien and as such does not pass title. Not only

is Terra’s argument unsupported by any authority, Terra fails to distinguish the cases cited

by Rabo in support of its argument to the contrary. The issue is not the character of a

mortgage but instead is the enforcement of a mortgagor’s covenant of ownership of the

property described in the mortgage and the equitable notion that, in certain circumstances,

breach of that covenant can and ought to be cured through an after-acquired title theory.

{13} Terra also argues that the after-acquired title doctrine is inapplicable in this case

because the original mortgagee, Farm Credit, was on notice through a 1994 title opinion that

the Estate of Williams held a 50% ownership interest in the property. Cf. Morgan, 105 N.M.

at 418, 733 P.2d at 866 (“Our decision is buttressed by the evidence that at the time [one of
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the defendants] executed the mortgage, the [plaintiff] was on constructive notice, by reason

of recordation, that [the defendant] was merely a joint tenant.”). At first glance, Terra’s

position would appear to have merit. But a study of the parties’ positions during the

proceedings take us down a different path. In that regard, we note the following. In its

summary judgment argument in the district court, Rabo acknowledged that when the

mortgage was executed Terra had title to only 50% of the property. In response, Terra stated

that Farm Credit knew that Terra owned only a 50% interest and knew that the Williams

Testamentary Trust owned the other 50% interest in the property, citing the 1994 title

opinion obtained by Farm Credit through its attorneys. In reply, Rabo stated that whether

Farm Credit was aware of the Williams Testamentary Trust “is not relevant to the afteracquired title issue[,]” because Terra gave the mortgage to Farm Credit with “mortgage

covenants.” Yet Rabo argued that even were knowledge relevant, “it is clear that Rabo did,

in fact, believe that Terra . . . owned the complete interest in the property at the time the

mortgage was executed.” Rabo’s authority for this representation was that the title opinion

was a preliminary opinion, that after it was prepared an affidavit of heirship was executed

on the mortgage date that, according to a supplemental title opinion, indicated that the only

surviving heir of Williams executed the deeds into Terra in her individual capacity, as well

as in her capacity as co-trustee under the Williams Testamentary Trust, and that “it was the

opinion of the examining attorneys that title to the entire surface estate of the captioned lands

is vested in Terra[.]” (Alteration omitted.) (Emphasis omitted.) (Internal quotation marks

and citations omitted.) Rabo concluded that “while not pertinent to the after-acquired title

issue, it is evident that Rabo believed that Terra . . . owned the 100% interest in the property

at the time the 1994 mortgage was executed.”

{14} Terra addressed Rabo’s discussion of the examining attorney’s opinion in the

supplemental title opinion and pointed out that Rabo failed to mention that the opinion also

stated “[s]ubject to those matters discussed in this opinion[.]” (Emphasis omitted.) And

Terra asserted that the supplemental opinion clearly stated: “REQUIREMENT A:

Unsatisfied. This requirement dealt with title to an undivided one-half interest in Tracts 2

and 3 of the captioned lands, credited in our original opinion to the heirs or devisees of . . .

Williams, deceased.” (Emphasis omitted.) Terra then argued in its sur-reply that this

showed that “the requirement of the 1994 title opinion had not been satisfied with the

recording of the [a]ffidavit of [h]eirship on November 9, 1994.”

{15} In the summary judgment proceeding, Terra submitted an affidavit of Steve Veigel.

The affidavit indicates that for over nine years Veigel had “been owner of Burnett & Veigel,

Inc., one of four general partners of Terra Partners, both parties to this action.” He stated

that in 1994 Terra “believed it was the only owner of the subject property until receipt of the

[title opinion]” which he attached as an exhibit to the affidavit. In the district court, Terra

also submitted requested findings of fact and conclusions of law. A requested finding set

out the existence of the title opinion it had referred to in its briefing and explained that the

1994 title opinion stated that the Williams Testamentary Trust was the owner of 50% interest

in the property. 
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{16} In its amended decision letter, based on which the court entered summary judgment

favoring Terra on the mortgage interest issue, the court set out numerous facts, which we

presume the court considered to be the undisputed facts that supported its decision and

ultimate summary judgment. In the letter, the court determined, as a matter of law, that “the

after-acquired title doctrine [was] not . . . applicable in this matter” without giving any

indication on what ground or rationale it did so. One of the court’s facts stated that the

mortgage provided by Terra to Farm Credit mortgaged “all its interest in and to [the]

property . . . with mortgage covenants.” (Omission in original.) It is unclear whether the

district court’s reference to “all its interest” only applies to Terra’s 50% ownership interest

at the time of the mortgage due to the 1994 title opinion recognizing a 50% interest in the

Williams Testamentary Trust. None of the facts nor anything else in the court’s decision

mentions anything about the 1994 title opinion or anything about any notice, knowledge, or

intent on Farm Credit’s part of any ownership interest of the Williams Testamentary Trust.

As a result, it is impossible for this Court to determine whether the district court’s grant of

summary judgment was at all based on a notice, knowledge, or intent, rationale or issue

relating to the 1994 title opinion and of the Williams Testamentary Trust ownership interest.

{17} The absence in the court’s decision letter of any factual bases or legal rationale

whatsoever for its legal conclusion and determination that “the after-acquired title doctrine

[was] . . . not applicable in this matter” leads us to conclude that, in the court’s view, the

after-acquired title doctrine would not be applicable even were the court to view all of the

facts in a light most favorable to Rabo, such as, for example, if the 1994 title opinion

documents were ignored and the only material facts before the court were simply (1) the

mortgage, (2) Rabo’s later acknowledgment that Terra owned only 50% of the property at

the time of the mortgage transaction, and (3) Terra’s after-acquired ownership of the

remaining 50% of the property. We cannot accept that limited view of the doctrine’s

applicability.

{18} We hold that, as a general matter, the after-acquired title doctrine can be applied in

New Mexico in favor of a mortgagee of property based on mortgage covenants unless

particular circumstances warrant non-application. We therefore reverse the district court’s

summary judgment favoring Terra and remand the case to the district court for further

proceedings on the issue of application of the after-acquired title doctrine. To the extent the

factual circumstances that are material to the analysis are disputed, summary judgment will

be inappropriate. 

The Cross-Appeal 

{19} Defendants assert on cross-appeal that the district court erred in dismissing its

counterclaims through which they sought (1) to establish the priority of Terra Partners’

assigned judgment lien acquired based on judgments obtained by Diversified Financial

Services, Inc. (Diversified) and to quiet title to the property and foreclose the Diversified

judgment lien; and (2) to establish the leasehold estate of Terra Partners on the basis of

collateral estoppel arising from certain Texas judgments.
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{20} Rabo argues that Defendants failed to preserve these points because Defendants did

not raise them in the district court. We agree. Defendants state that these points were

preserved in their response to Rabo’s motion for summary judgment and during oral

argument in the district court. We have reviewed the record at the record cites supplied by

Defendants. The record does not support preservation. We will not consider points and

arguments that are not made to the district court and raised for the first time on appeal. See

Agua Fria Save The Open Space Ass’n v. Rowe, 2011-NMCA-054, ¶ 27, 149 N.M. 812, 255

P.3d 390 (“To preserve a question for review, it must appear that a ruling or decision by the

district court was fairly invoked.” (alterations omitted) (internal quotation marks and

citation omitted)); see also Chrysler Credit Corp. v. Beagles Chrysler-Plymouth, 83 N.M.

272, 273, 491 P.2d 160, 161 (1971) (“[A] matter not brought to the attention of the trial court

cannot be raised for the first time on appeal.”).

CONCLUSION

{21} We reverse the district court’s determination that Rabo was entitled to foreclose its

mortgage lien only as to a 50% interest in the property, and we remand for further

proceedings related to the applicability of the after-acquired title doctrine in accordance with

this Opinion. Additionally, we hold that lack of preservation precludes consideration of

Defendants’ cross-appeal points, and we affirm the district court’s dismissal of Defendants’

counterclaims.

{22} IT IS SO ORDERED.

____________________________________

JONATHAN B. SUTIN, Judge

WE CONCUR:

____________________________________

MICHAEL D. BUSTAMANTE, Judge

____________________________________

TIMOTHY L. GARCIA, Judge

Topic Index for RABO Agrifinance, Inc. v. Terra XXI, Ltd., No. 30,286

AE APPEAL AND ERROR

AE-PA Preservation of Issues for Appeal

CP CIVIL PROCEDURE

CP-CM Counterclaim

CP-ES Estoppel
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CP-SJ Summary Judgment

PR PROPERTY

PR-CN Covenants

PR-FC Foreclosure

PR-MG Mortgages