2023 New Mexico Statutes › Chapter 55 - Uniform Commercial Code › Article 3 - Negotiable Instruments › Part 3 - ENFORCEMENT OF INSTRUMENTS › Section 55-3-301 - Person entitled to enforce instrument.

"Person entitled to enforce" an instrument means (i) the holder of the instrument, (ii) a nonholder in possession of the instrument who has the rights of a holder, or (iii) a person not in possession of the instrument who is entitled to enforce the instrument pursuant to Section 55-3-309 or 55-3-418(d) NMSA 1978. A person may be a person entitled to enforce the instrument even though the person is not the owner of the instrument or is in wrongful possession of the instrument.
History:
1978 Comp., § 55-3-301, enacted by Laws 1992, ch. 114, § 114.
OFFICIAL COMMENTS
UCC Official Comments by ALI & the NCCUSL. Reproduced with permission of the PEB for the UCC. All rights reserved.
This section replaces former Section 3-301 [55-3-301 NMSA 1978] that stated the rights of a holder. The rights stated in former Section 3-301 to transfer, negotiate, enforce, or discharge an instrument are stated in other sections of Article 3. In revised Article 3, Section 3-301 defines "person entitled to enforce" an instrument. The definition recognizes that enforcement is not limited to holders. The quoted phrase includes a person enforcing a lost or stolen instrument. Section 3-309 [55-3-309 NMSA 1978]. It also includes a person in possession of an instrument who is not a holder. A nonholder in possession of an instrument includes a person that acquired rights of a holder by subrogation or under Section 3-203(a) [55-3-203 NMSA 1978]. It also includes both a remitter that has received an instrument from the issuer but has not yet transferred or negotiated the instrument to another person and also any other person who under applicable law is a successor to the holder or otherwise acquires the holder's rights.
ANNOTATIONS
Repeals.
— Laws 1992, ch. 114, § 237 repealed former 55-3-301 NMSA 1978, as enacted by Laws 1961, ch. 96, § 3-301, relating to rights of a holder, effective July 1, 1992. Laws 1992, ch. 114, § 114, enacted a new section, effective July 1, 1992. For provisions of former section,
see
the 1991 NMSA 1978 on
NMOneSource.com
.
Possession of an instrument.
— Physical possession of an unindorsed promissory note made payable to a third party or a note indorsed to a third party does not establish the person in possession of the note as its holder with the right of enforcement.
Bank of New York v. Romero
, 2014-NMSC-007,
rev'g
2011-NMCA-110, 150 N.M. 769, 266 P.3d 638.
Holder of the instrument.
— Where plaintiff sought to foreclose a mortgage that secured a promissory note in plaintiff's physical possession; the note was made payable to the order of the original lender; the original note admitted at trial was indorsed twice, first with a blank indorsement by the original lender and second with a special indorsement made payable to a third person; and none of the indorsements included plaintiff, plaintiff's possession of the note did not establish plaintiff as a holder with the right of enforcement.
Bank of New York v. Romero
, 2014-NMSC-007,
rev'g
2011-NMCA-110, 150 N.M. 769, 266 P.3d 638.
Non-holder in possession of the instrument.
— Where plaintiff sought to foreclose a mortgage that secured a promissory note in plaintiff's physical possession; the note was made payable to the order of the original lender; the original note admitted at trial was endorsed twice, first with a blank indorsement by the original lender and second with a special indorsement made payable to a third person; none of the indorsements included plaintiff; the original lender's nominee, which had authority to assign the mortgage, but not the note, assigned the mortgage to plaintiff three months after the foreclosure complaint was filed; testimony by employees of plaintiff's loan servicing agent that the servicing agent's business records indicated that plaintiff was the transferee of the note was inadmissible because the servicing agent did not begin servicing loans for plaintiff until seven months after the complaint was filed and the witnesses lacked personal knowledge that the note was transferred to plaintiff prior to the filing of the complaint; plaintiff did not offer the business records themselves to establish the transfer of the note to plaintiff; and plaintiff argued that because the original lender did not claim ownership of the note that the note was transferred to plaintiff, plaintiff lacked standing to foreclose the mortgage because it did not introduce any evidence demonstrating that it was a party with a right to enforce the note either by an indorsement or proper transfer.
Bank of New York v. Romero
, 2014-NMSC-007,
rev'g
2011-NMCA-110, 150 N.M. 769, 266 P.3d 638.
Standing is not jurisdictional in mortgage foreclosure cases.
— Standing is not a jurisdictional prerequisite in mortgage foreclosure cases in New Mexico. When a statute creates a cause of action and designates who may sue, the issue of standing becomes interwoven with that of subject matter jurisdiction. Standing then becomes a jurisdictional prerequisite to an action. Mortgage foreclosure actions, however, are not created by statute, and therefore the issue of standing in those cases cannot be jurisdictional. As a matter of sound judicial policy, the injury in fact prong of New Mexico's standing analysis, however, requires that the party bringing suit show that he or she is injured or threatened with injury in a direct and concrete way.
Deutsche Bank Nat'l Trust Co. v. Johnston
, 2016-NMSC-013,
aff'g
2014-NMCA-090, 335 P.3d 217.
Standing in mortgage foreclosure cases.
— The Uniform Commercial Code (UCC) provides that there are three scenarios in which a person is entitled to enforce a negotiable instrument such as a promissory note: when that person is the holder of the instrument, when that person is a nonholder in possession of the instrument who has the rights of a holder, and when that person does not possess the instrument but is still entitled to enforce it subject to the lost-instrument provisions of the UCC. To show a direct and concrete injury, a plaintiff in a mortgage foreclosure action must establish that it falls into one of these statutory categories that would establish both its right to enforce the homeowner's promissory note and its basis for claiming that it suffered a direct injury from the homeowner's alleged default on the note. Although standing is not jurisdictional in mortgage foreclosure actions, standing must be established as of the time of filing suit.
Deutsche Bank Nat'l Trust Co. v. Johnston
, 2016-NMSC-013,
aff'g
2014-NMCA-090, 335 P.3d 217.
Where plaintiff in mortgage foreclosure action filed a complaint seeking foreclosure on the home of respondent homeowner and attached to its complaint an unindorsed note, mortgage, and land recording, both naming a third party as the mortgagee, and although plaintiff later provided documentation and testimony showing that a document assigning the mortgage was dated prior to the filing of the complaint but recorded after the complaint was filed, and plaintiff possessed a version of the note indorsed in blank at the time of trial, plaintiff failed to establish that it had standing at the time it filed its complaint, because plaintiff did not produce a note indorsed in blank when it filed suit, and the subsequent production of a blank note did not prove that plaintiff possessed the blank note when it filed suit. A party who only has the mortgage but no note has not suffered any injury given that bare possession of the mortgage does not endow its possessor with any enforceable right absent possession of the note. The district court's determination that plaintiff established standing to foreclose was not supported by substantial evidence.
Deutsche Bank Nat'l Trust Co. v. Johnston
, 2016-NMSC-013,
aff'g
2014-NMCA-090, 335 P.3d 217.
Standing to foreclose.
— In foreclosure actions, standing is a jurisdictional prerequisite. A party filing for foreclosure is required to demonstrate under New Mexico's Uniform Commercial Code (UCC) that it had standing to bring a foreclosure action at the time it filed suit. In order to establish its standing to foreclose, a plaintiff must demonstrate that it had the right to enforce a promissory note and the right to foreclose the mortgage at the time the complaint for foreclosure was filed. Because the right to enforce the mortgage arises from the right to enforce the note, the question of standing turns on whether the plaintiff has established timely ownership of the note. Under the UCC, a promissory note is a negotiable instrument which can be enforced by a third party who is a holder of the instrument. A third party in possession of the note can enforce a negotiable instrument as a holder if the note is either indorsed specifically to the third party or indorsed in blank, not specifying a person or entity to which the note is indorsed.
BAC Home Loans Servicing LP v. Smith
, 2016-NMCA-025.
Where plaintiff, a home loan servicing company claiming to be the holder of a promissory note and mortgage with the right of enforcement, filed a complaint seeking foreclosure against defendant, plaintiff's evidence, an unindorsed copy of the promissory note, along with an unrecorded assignment of defendant's mortgage, showing that the mortgage company assigned the mortgage to plaintiff, was insufficient to establish plaintiff as the holder of the promissory note at the time the complaint for foreclosure was filed, because possession of an unindorsed note made payable to a third party does not establish the right of enforcement, and a plaintiff who has not established the right to enforce the note cannot foreclose the mortgage, even if the evidence shows that the mortgage was assigned to the plaintiff.
BAC Home Loans Servicing LP v. Smith
, 2016-NMCA-025.
Standing on a prudential basis.
— To demonstrate standing on a prudential basis, the foreclosing party must demonstrate that it had the right to enforce the note and the right to foreclose the mortgage at the time the foreclosure suit was filed.
PNC Mortgage v. Romero
, 2016-NMCA-064.
In a foreclosure action, where plaintiff mortgage company attached to its mortgage foreclosure complaint an unindorsed promissory note made payable to plaintiff's predecessor in interest, and, years after filing for foreclosure, produced an indorsed promissory note attached to its motion for summary judgment, plaintiff failed to establish standing to enforce the note because in order to enforce a note made payable to a third party, a successor must prove that it had both physical possession of the note as well as the right to enforce it through a proper indorsement or transfer via negotiation, and mere possession of an unindorsed note made payable to a third party does not establish the right of enforcement, and the undated indorsement on the promissory note attached to the motion for summary judgment was insufficient to show that plaintiff was the holder of the note at the time the foreclosure complaint was filed.
PNC Mortgage v. Romero
, 2016-NMCA-064.
Holder of an instrument defined.
— The holder of the instrument is the person in possession of a negotiable instrument that is payable either to bearer or to an identified person that is the person in possession. A third party who is not the payee of the instrument must prove both physical possession and the right to enforcement through either a proper indorsement or a transfer by negotiation.
Flagstar Bank v. Licha
, 2015-NMCA-086.
Standing to enforce an instrument in a foreclosure action.
— Standing is a jurisdictional prerequisite that may not be waived and may be raised at any stage of the proceedings, even sua sponte by the appellate court. Plaintiffs who bring foreclosure actions must demonstrate that they had the right to enforce the note and mortgage at the time that they filed the foreclosure suit.
Flagstar Bank v. Licha
, 2015-NMCA-086.
In a foreclosure action, where plaintiff bank sought to enforce a promissory note and mortgage, the promissory note that bank attached to its complaint was specially indorsed by the lender, identifying bank as the person to whom the promissory note was payable. Plaintiff bank provided sufficient evidence that it was the holder of the note with the right to enforce it.
Flagstar Bank v. Licha
, 2015-NMCA-086.
A holder of a promissory note has the right to enforce the note.
— In a foreclosure action, where plaintiff bank attached to its mortgage foreclosure complaint a copy of the homeowner's mortgage and an unindorsed promissory note bearing a statement stamped on the top of the first page certifying that it was a true and correct copy of the original note, and where defendant homeowner claimed that summary judgment was improper because defendant bank failed to demonstrate that it was the holder of the promissory note before filing its complaint, and therefore lacked standing to enforce the note, the district court did not err in granting plaintiff's in rem motion for summary judgment, because affidavits and accompanying exhibits were sufficient to establish a prima facie showing that plaintiff was the holder in possession of the promissory note at the time the complaint was filed, and defendant failed to meet its burden of showing that a genuine issue of material fact existed on the issue of plaintiff's status as the holder of the note. Plaintiff, as holder of the promissory note had standing to enforce the note and foreclose the mortgage.
Los Alamos Nat'l Bank v. Velasquez
, 2019-NMCA-040, cert. denied.
Loan servicer with authority may enforce a promissory note.
— In a foreclosure action, where evidence established that Fannie Mae was the owner of the mortgage loan and plaintiff bank was the loan servicer, and where plaintiff provided evidence that on the day it filed its complaint for foreclosure, it was in possession of the original promissory note, which had been indorsed in blank a few days after it was executed by defendant homeowner, plaintiff, as the holder of the promissory note, was among the entities authorized by statute to enforce the note, notwithstanding the fact that it did not own the note.
Los Alamos Nat'l Bank v. Velasquez
, 2019-NMCA-040, cert. denied.
A mortgage securing the repayment of a promissory note follows the note.
— In a residential foreclosure action, where plaintiff bank filed a complaint to enforce defendant's promissory note and foreclose his mortgage, and where defendant claimed that plaintiff had no right to foreclose his mortgage as a result of an unrecorded assignment of mortgage from the original lender, wells fargo bank, to another entity before wells fargo bank later assigned the same mortgage to plaintiff, claiming that the unrecorded assignment created a genuine issue of fact regarding plaintiff's ownership of the mortgage, the district court did not err in granting plaintiff's motion for summary judgment because the unrecorded assignment was a legal nullity, and it is a long-standing principle that a mortgage securing the repayment of a promissory note follows the note, and thus only the rightful owner of the note has the right to enforce the mortgage. In the present case, plaintiff established that it was in possession of the promissory note at the time of filing by presenting the original note indorsed in blank with its complaint, and under New Mexico law, when the promissory note indorsed in blank was transferred to plaintiff prior to filing, the mortgage followed the note into plaintiff's possession.
HSBC Bank USA v. Wiles
, 2020-NMCA-035, cert. denied.
Standing is not jurisdictional in actions to enforce a promissory note and foreclosure on a mortgage.
— Where defendant, claiming to be the holder of a promissory note and mortgage with the right of enforcement, filed a foreclosure complaint, plaintiff's claim that the district court lacked jurisdiction over defendant's foreclosure action because defendant lacked standing was without merit, because the lack of a defendant's standing in an action to enforce a promissory note does not divest a court of subject matter jurisdiction. Standing is a jurisdictional prerequisite where an action is created by statute and the statute specifies that only a limited class of plaintiff who satisfy certain conditions may sue, but when a claim is not created by statute but rather born of common law, the lack of the traditional justiciability prerequisites does not impair a court's jurisdiction. Consequently when a district court enters a foreclosure judgment against a defendant, that judgment cannot be collaterally attacked in a subsequent action as void for the reason that the plaintiff in the prior matter lacked standing. The district court had jurisdiction to adjudicate defendant's complaint to enforce the promissory note and foreclose on the mortgage, independent of defendant's standing.
Phoenix Funding, LLC v. Aurora Loan Services, LLC
, 2017-NMSC-010,
rev'g
2016-NMCA-010, 365 P.3d 8.
Standing to bring a foreclosure action.
— A promissory note is a negotiable instrument which can be enforced by the holder of the instrument, a holder who does not possess the instrument and has the rights of a holder, or a person who does not possess the instrument, but is entitled to enforce it pursuant to certain provisions of the Uniform Commercial Code. A third party must prove both physical possession and the right to enforcement through either a proper indorsement or a transfer by negotiation.
Phoenix Funding, LLC v. Aurora Loan Servs., LLC
, 2016-NMCA-010, cert. granted, 2016-NMCERT-001.
Where defendant, claiming to be the holder of a promissory note and mortgage with the right of enforcement, filed a complaint seeking foreclosure on certain property, defendant's evidence of an assignment of mortgage and an unindorsed promissory note, which was payable to a third party, was insufficient to establish defendant as the holder of the promissory note at the time the complaint for foreclosure was filed, because possession of an unindorsed note made payable to a third party does not establish the right of enforcement. Defendant did not present the necessary evidence to establish it had standing to enforce the promissory note at the time the foreclosure complaint was filed.
Phoenix Funding, LLC v. Aurora Loan Servs., LLC
, 2016-NMCA-010, cert. granted, 2016-NMCERT-001.
Indorsement was effective to show that plaintiff was the holder of the note at the time the complaint was filed.
— Where plaintiff bank filed its initial complaint of foreclosure against defendant, attaching to the complaint a copy of a promissory note executed by defendant which was unindorsed and contained a title company stamp, and where plaintiff filed a second complaint for foreclosure after the initial complaint was voluntarily dismissed, attaching to the complaint a copy of a promissory note which contained a blank indorsement signed by an executive vice-president of the original mortgage lender, the district court did not err in concluding that plaintiff had standing to enforce the note and mortgage lien, because plaintiff made a prima facie showing of standing by demonstrating possession of the promissory note indorsed in blank at the time the complaint was filed, and the fact that the original note was inspected by the district court, copied, and admitted into evidence was substantial evidence to support the district court's determination that the note was properly indorsed.
Bank of N.Y. Mellon v. Luu
, 2019-NMCA-053.
Party's lack of standing deprives district court of subject matter jurisdiction.
— Where defendant, claiming to be the holder of a promissory note and mortgage with the right of enforcement, filed a complaint seeking foreclosure on certain property, defendant's evidence of an assignment of mortgage and an unindorsed promissory note which was payable to a third party was insufficient to establish defendant as the holder of the promissory note at the time the complaint for foreclosure was filed, because possession of an unindorsed note made payable to a third party does not establish the right of enforcement. Defendant did not present the necessary evidence to establish it had standing to enforce the promissory note at the time the foreclosure complaint was filed. Defendant's lack of standing deprived the district court of subject matter jurisdiction, and therefore the district court's original foreclosure judgment was void.
Phoenix Funding, LLC v. Aurora Loan Servs., LLC
, 2016-NMCA-010, cert. granted, 2016-NMCERT-001.
An assignment of a mortgage must be supported by consideration between the parties.
— An assignment of a mortgage must be supported by a good and valuable consideration in order to be valid as between the parties. The lack of consideration is not available as a defense to one who was not a party to the assignment.
Flagstar Bank v. Licha
, 2015-NMCA-086.
In a foreclosure action, where defendants were not parties to a transfer of a promissory note and mortgage from the lender to the plaintiff bank, lack of consideration in the transfer was not available to defendants as a defense, because such a defense is available only to the parties to the transfer.
Flagstar Bank v. Licha
, 2015-NMCA-086.
Assignment of the right to enforce a lost instrument.
— In a foreclosure case, where plaintiff, the assignee of a lost negotiable instrument, sought to enforce that instrument by virtue of the assignment, and where defendant moved for summary judgment, contending that she had established an affirmative defense to enforce the note, and thus to foreclosure of the mortgage, because it was undisputed that the note was lost and that plaintiff did not have the rights of a holder in due course, and where the district court rejected plaintiff's argument, but concluded that plaintiff lacked standing to enforce the note because plaintiff had not been in possession of the instrument and entitled to enforce it when loss of possession occurred, the district court erred in granting defendant's motion for summary judgment, because the assignment of a lost instrument by a person entitled to enforce it transfers the right of enforcement under NMSA 1978, § 55-3-309 to the assignee if the court ensures that the borrower is adequately protected as required by § 55-3-309(b).
Citimortgage, Inc. v. Garcia
, 2023-NMCA-081.
Lack of standing to challenge a mortgage assignment.
— A defendant in a foreclosure action lacks standing to challenge alleged violations of a pooling and servicing agreement, an agreement to which he or she is neither a party to nor a third-party beneficiary of, in order to establish that the lending institution is not a valid holder of the loan documents and thus is not the proper party to foreclose.
Deutsche Bank Nat'l Trust Co. v. MacLaurin
, 2015-NMCA-061.
In a foreclosure action, where defendant borrowers executed a promissory note that was secured by a mortgage covering the borrowers' property, and where the promissory note had been assigned to plaintiffs who initiated foreclosure proceedings after borrowers defaulted on the promissory note, defendants lacked standing to request a judicial determination of whether plaintiffs were the valid holders of the loan documents, and therefore the proper party to foreclose, based on violations of a pooling and servicing agreement, when borrowers were not parties or third-party beneficiaries of the pooling and servicing agreement.
Deutsche Bank Nat'l Trust Co. v. MacLaurin
, 2015-NMCA-061.