Court Opinion

ID: 3191624
Source: CourtListenerOpinion
Date Created: 2016-04-05 22:05:12.152142+00
Date Added: 2024-06-11T14:35:32.943828
License: Public Domain

I attest to the accuracy and
                                              integrity of this document
                                                New Mexico Compilation
                                              Commission, Santa Fe, NM
                                             '00'04- 13:48:15 2016.03.30

         IN THE SUPREME COURT OF THE STATE OF NEW MEXICO

Opinion Number: 2016-NMSC-013

Filing Date: March 3, 2016

Docket No. S-1-SC-34726

DEUTSCHE BANK NATIONAL TRUST
COMPANY, AS TRUSTEE FOR MORGAN
STANLEY ABS CAPITAL 1 INC. TRUST 2006-NC4,

       Plaintiff-Petitioner,

v.

JOHNNY LANCE JOHNSTON,

       Defendant-Respondent.

ORIGINAL PROCEEDING ON CERTIORARI
Manuel I. Arrieta, District Judge

Holland & Hart LLP
Larry J. Montaño
Santa Fe, NM

Murr Accomazzo & Siler, PC
Eric P. Accomazzo
Jamie G. Siler
James P. Eckels
Denver, CO

for Petitioner

Law Office of Jane B. Yohalem
Jane B. Yohalem
Santa Fe, NM

for Respondent

Daniel Yohalem
Santa Fe, NM

                                1
Santa Fe Neighborhood Law Center
Frederick M. Rowe
Santa Fe, NM

Katherine Elizabeth Murray
Santa Fe, NM

Joshua David Schwartz
Santa Fe, NM

for Amici Curiae Santa Fe Neighborhood Law Center,
Mary and Joseph Romero, Professor Nathalie Martin,
United South Broadway, Somos Un Pueblo Unidos,
The Santa Fe Neighborhood Network, Homewise, Inc.,
Santa Fe Area Home Builders Association, and
New Mexico Foreclosure Defense Group

                                         OPINION

CHÁVEZ, Justice.

{1}      This case requires us once again to examine traditional rules of jurisdiction and
standing in the context of modern mortgage foreclosure actions. In Bank of New York v.
Romero, 2014-NMSC-007, ¶¶ 19-38, 320 P.3d 1, we concluded that the plaintiff did not
establish standing to foreclose on the defendant’s home when it could not prove that it had
the right to enforce the promissory note on the mortgage at the time it filed suit. See NMSA
1978, § 55-3-301 (1992) (defining “ ‘[p]erson entitled to enforce’ [a negotiable]
instrument”). In the present case, Petitioner Deutsche Bank National Trust Company, acting
as trustee for Morgan Stanley ABS Capital 1 Inc. Trust 2006-NC4 (Deutsche Bank), filed
a complaint seeking foreclosure on the home of Respondent Johnny Lance Johnston
(Homeowner) and attached to its complaint an unindorsed note, mortgage, and land
recording, both naming a third party as the mortgagee. Deutsche Bank later provided
documentation and testimony showing that (1) a document assigning the mortgage to
Deutsche Bank was dated prior to the filing of the complaint but recorded after the
complaint was filed; (2) Deutsche Bank possessed a version of the note indorsed in blank
at the time of trial; and (3) a servicing company began servicing the loan to Homeowner on
behalf of Deutsche Bank prior to the filing of the complaint. After receiving this evidence,
the district court found that Deutsche Bank had standing to foreclose on Homeowner’s
property. The Court of Appeals disagreed, opining that “standing is a jurisdictional
prerequisite for a cause of action,” and concluded that the evidence provided by Deutsche
Bank did not establish its standing as of the time it filed its complaint. Deutsche Bank Nat’l
Tr. Co. v. Beneficial N.M. Inc., 2014-NMCA-090, ¶¶ 8, 13-15, 335 P.3d 217, cert. granted,
2014-NMCERT-008. Although we hold that standing is not a jurisdictional prerequisite in
this case, we nonetheless affirm the Court of Appeals’s ultimate conclusion that the evidence

                                              2
provided by Deutsche Bank did not establish standing.

I.     BACKGROUND

{2}     On January 31, 2006, Homeowner refinanced his home by executing a promissory
note made payable to New Century Mortgage Corporation (New Century). The note was
secured by a mortgage on Homeowner’s property in Las Cruces. Homeowner defaulted on
his loan payments beginning in August 2008, and received a letter notifying him of his
default dated October 12, 2008 from American Servicing Company (ASC), a loan servicing
company.

{3}     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 Century which did not contain an indorsement; and (2) a January 31, 2006
mortgage on Homeowner’s property recorded in the Doña Ana County Office of the County
Clerk on February 7, 2006 by New Century, which the County Clerk also names as the
mortgagee. In its complaint, Deutsche Bank alleged that it owned the mortgage through
assignment and was a holder in due course of the note. Homeowner “acknowledge[d]” this
allegation in his pro se answer to Deutsche Bank’s complaint.

{4}     On August 11, 2010, Homeowner filed an amended motion to dismiss for lack of
standing, contending that Deutsche Bank “did not show ownership of the note, nor a security
interest,” and that it provided no other evidence that it was the holder of the note as of the
date that it filed its complaint. Deutsche Bank’s response to Homeowner’s motion to dismiss
attached an assignment of mortgage document dated February 7, 2006 and recorded in Doña
Ana County on December 9, 2009 as proof that Deutsche Bank held the note at the time it
filed the complaint.1

{5}      The district court set the hearing on Homeowner’s motion to dismiss for the same day
as trial. After concluding that Homeowner’s arguments on the motion to dismiss would be
similar to his arguments on the merits, the district court took Homeowner’s motion under
advisement and agreed to consider it during the bench trial on the merits.

{6}     At trial, Deutsche Bank offered further evidence to prove that it owned the note.
First, Deutsche Bank proffered a version of the January 31, 2006 note that was indorsed in
blank by New Century. This new note was identical to the original note attached to
Deutsche Bank’s complaint except that the note attached to the complaint did not contain
any indorsement. Second, Deutsche Bank offered the testimony of Erin Hirzel Roesch, a

       1
         Deutsche Bank’s response to Homeowner’s motion to dismiss claimed that the
assignment of mortgage was recorded on January 9, 2009, which would have been prior to
its February 24, 2009 complaint. However, Deutsche Bank did not provide any evidence
establishing that the assignment was recorded on that date.

                                              3
litigation specialist for the loan servicing company. Ms. Roesch was employed by Wells
Fargo Bank, NA, which she testified is effectively the same company as ASC. Ms. Roesch
testified based on her review of the file on Homeowner’s mortgage. She testified that
because the proffered note was indorsed in blank, Deutsche Bank, as holder of the note,
could act as the lender of the note; that Deutsche Bank was assigned the mortgage on
February 7, 2006; and that her company began servicing the loan in July 2006.

{7}     The district court concluded that Deutsche Bank was “the current holder of the Note
and Mortgage.” The court also concluded that Homeowner was “in default in payment of
the principal and interest on the Note and Mortgage described in [Deutsche Bank’s]
Complaint.” Based on these findings, the district court then held that Deutsche Bank was
entitled to a foreclosure judgment on Homeowner’s property.

{8}      The Court of Appeals reversed and remanded to the district court “with instructions
to vacate its judgment of foreclosure” because Deutsche Bank lacked standing to foreclose.
Deutsche Bank Nat’l Tr. Co., 2014-NMCA-090, ¶¶ 15, 18. The Court of Appeals reasoned
that under Bank of New York, 2014-NMSC-007, ¶ 17, “standing is a jurisdictional
prerequisite for a cause of action and must be established at the time the complaint is filed.”
Deutsche Bank Nat’l Tr. Co., 2014-NMCA-090, ¶ 8. Accordingly, “to establish standing to
foreclose, a lender must show that, at the time it filed its complaint for foreclosure, it had:
(1) a right to enforce the note, which represents the debt, and (2) ownership of the mortgage
lien upon the debtor’s property.” Id. (emphasis added). In practical terms, the Court of
Appeals’s decision requires a party seeking to establish its right to enforce a note to either
produce an original or properly indorsed note with its complaint for foreclosure or to later
introduce a dated indorsed note executed prior to the initiation of the foreclosure suit. See
id. ¶ 12. The Court concluded that in this case, “neither the unindorsed copy of the note
produced with the foreclosure complaint nor the indorsed note produced at trial were
sufficient to show that [Deutsche Bank] held the note when it filed the complaint” and that
the assignment of mortgage proffered by Deutsche Bank had “no bearing on the validity or
the timing of the note’s indorsement.” Id. ¶¶ 13-14.

{9}     We granted Deutsche Bank’s petition for certiorari to review (1) whether standing
is jurisdictional in mortgage foreclosure cases; (2) whether the Court of Appeals erred in
interpreting Bank of New York to require a plaintiff who presents an original, indorsed-in-
blank promissory note at trial to establish that it is the holder of the note by presenting an
indorsement dated prior to the filing of the complaint or by attaching an indorsed copy of the
note to the complaint; and (3) whether the Court of Appeals erred by concluding that an
assignment of mortgage dated prior to the filing of the complaint cannot by itself establish
standing. While we take this opportunity to clarify that standing is not a jurisdictional
prerequisite in mortgage foreclosure cases in New Mexico, we otherwise affirm the result
reached by the Court of Appeals based on principles of prudential standing.

II.    DISCUSSION

                                              4
A.      The Doctrine of Standing in New Mexico

{10} Deutsche Bank challenges the Court of Appeals’s statement that “standing is a
jurisdictional prerequisite for a cause of action.” Deutsche Bank Nat’l Tr. Co., 2014-
NMCA-090, ¶ 8 (citing Bank of N.Y., 2014-NMSC-007, ¶ 17). Deutsche Bank accurately
observes that our jurisprudence has previously recognized that standing is jurisdictional in
the context of statutory causes of action rather than all causes of action. Bank of N.Y., 2014-
NMSC-007, ¶ 17. With that distinction in mind, Deutsche Bank then argues that the cause
of action to enforce a promissory note existed at common law and was not created by statute.
Deutsche Bank concludes that standing in this case therefore cannot be jurisdictional. We
agree with Deutsche Bank that standing is not jurisdictional in this case because the cause
of action to enforce a promissory note was not created by statute. Therefore, only prudential
rules of standing apply to the claims in this case.

{11} As a general rule, “standing in our courts is not derived from the state constitution,
and is not jurisdictional.” ACLU of N.M. v. City of Albuquerque, 2008-NMSC-045, ¶ 9, 144
N.M. 471, 188 P.3d 1222. However, “ ‘[w]hen 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.’ ” Id.
¶ 9 n.1 (quoting In re Adoption of W.C.K., 2000 Pa. Super. 68, ¶ 6, 748 A.2d 223 (Pa. Super.
Ct. 2000), abrogated by In re Nomination Petition of deYoung, 903 A.2d 1164, 1168, 1168
n.5 (Pa. 2006)). In light of the conclusions reached by the Court of Appeals in this case,
Deutsche Bank National Trust Co., 2014-NMCA-090, ¶ 8, we take this opportunity to clarify
our statements in Bank of New York, 2014-NMSC-007, ¶ 17, and hold that mortgage
foreclosure actions are not created by statute. Therefore, the issue of standing in those cases
cannot be jurisdictional.

{12} The cause of action to enforce a promissory note originated at common law and
already existed when New Mexico adopted the Uniform Commercial Code (UCC) in 1961.
See Kepler v. Slade, 1995-NMSC-035, ¶ 14, 119 N.M. 802, 896 P.2d 482 (“Under the
common law rule, an action to foreclose on real property is separate and distinct from an
action to recover on an underlying promissory note.”); Edwards v. Mesch, 1988-NMSC-085,
¶ 4, 107 N.M. 704, 763 P.2d 1169 (“The rights of a holder of a promissory note were
discussed by this court as early as [1853].”). New Mexico’s adoption of the UCC did not
create the rights and remedies associated with actions to enforce promissory notes, but
instead merely codified those rights and clarified their scope in the interest of attaining
uniformity with other states that had adopted the UCC. See Males v. W.E. Gates & Assocs.,
504 N.E.2d 494, 495 (Ohio Misc. 2d 1985) (“[A]ctions on promissory notes are rooted in the
common law of contracts. The Uniform Commercial Code represents the fifty states’ effort
toward achieving uniformity and certainty in commercial transactions. Thus, this action is
not a representative of a right created by statute, such as a wrongful death action.”). See also
1A C.J.S. Actions § 37 (2015) (noting that the UCC “has been held to displace common-law
remedies even though it does not create new causes of action, where it provides a
comprehensive remedy” (emphasis added) (footnotes omitted)). Indeed, the UCC

                                               5
recognizes the continuing vitality of common law “principles of law and equity” which
supplement its provisions. Section 55-1-103(b). See also Venaglia v. Kropinak,
1998-NMCA-043, ¶¶ 11-12, 125 N.M. 25, 956 P.2d 824 (“There are two principal sources
of law governing the rights and duties of the parties with respect to a guarantee of a
promissory note. One is Article 3 of the Uniform Commercial Code. . . . The other is the
common law.”). Thus, an action to enforce a promissory note fell within the district court’s
general subject matter jurisdiction in this case because it was not created by statute.

{13} When standing does not act as a jurisdictional threshold, as in this case, prudential
considerations govern our analysis. See ACLU of N.M., 2008-NMSC-045, ¶ 9. While New
Mexico courts are not subject to the jurisdictional limitations imposed by Article III, Section
2 of the United States Constitution, the standing jurisprudence in our courts has “long been
guided by the traditional federal standing analysis.” ACLU of N.M., 2008-NMSC-045, ¶ 10.
“Thus, at least as a matter of judicial policy if not of jurisdictional necessity, our courts have
generally required that a litigant demonstrate injury in fact, causation, and redressability to
invoke the court’s authority to decide the merits of a case.” Id.; see also Davis v. Fed.
Election Comm’n, 554 U.S. 724, 733 (2008) (“To qualify for standing, a claimant must
present an injury that is concrete, particularized, and actual or imminent; fairly traceable to
the defendant’s challenged behavior; and likely to be redressed by a favorable ruling.”).
However, it is well settled that New Mexico courts are also not bound by the limitations on
standing that are constitutionally imposed on federal courts and we have occasionally
granted standing when it would not otherwise exist under the federal analysis, most notably
in instances where a case presents a “question of fundamental importance to the people of
New Mexico.” See, e.g., Baca v. N.M. Dep’t of Pub. Safety, 2002-NMSC-017, ¶ 4, 132
N.M. 282, 47 P.3d 441 (holding that validity of the Concealed Handgun Carry Act raised
important constitutional question sufficient to ignore normal limitations on standing (internal
quotation marks and citation omitted)); State ex rel. Clark v. Johnson, 1995-NMSC-048, ¶¶
1-2, 15, 120 N.M. 562, 904 P.2d 11 (claim that the Governor lacked authority to enter into
various compacts pursuant to the Indian Gaming Regulatory Act was of sufficient public
importance to confer standing without examining the standing of individual litigants); State
ex rel. Sego v. Kirkpatrick, 1974-NMSC-059, ¶ 7, 86 N.M. 359, 524 P.2d 975 (conferring
standing under this Court’s discretionary power due to great public importance of
constitutional challenge to partial vetoes); State ex rel. Gomez v. Campbell, 1965-NMSC-
025, ¶¶ 15, 18, 75 N.M. 86, 400 P.2d 956 (concluding that the plaintiffs did not establish
standing but proceeding to the merits of the constitutional question in that case due to its
“great public interest”).

{14} In ACLU of New Mexico, we reaffirmed our adherence to the federal three-pronged
approach in cases that do not present issues of fundamental public importance; we also
recognized that the injury in fact requirement in particular is “deeply ingrained in New
Mexico jurisprudence.” 2008-NMSC-045, ¶¶ 10-22. Even a slight injury establishes an
injury in fact sufficient to confer standing. N.M. Right to Choose/NARAL v. Johnson,
1999-NMSC-005, ¶ 12, 126 N.M. 788, 975 P.2d 841. However, we have repeatedly
emphasized that the injury in fact prong of our standing analysis “[r]equir[es] that the party

                                                6
bringing suit show that he [or she] is injured or threatened with injury in a direct and
concrete way” as a matter of “sound judicial policy.” ACLU of N.M., 2008-NMSC-045, ¶
19 (internal quotation marks and citation omitted); see also N.M. Right to Choose/NARAL,
1999-NMSC-005, ¶ 12 (litigant generally must show direct injury to establish standing).
Although the UCC’s definition of who may enforce a note does not create a jurisdictional
prerequisite in this case, it nonetheless guides our determination of whether the plaintiff can
articulate a direct injury that the cause of action is intended to address. See Bank of N.Y.,
2014-NMSC-007, ¶¶ 19-38 (analyzing whether foreclosure plaintiff had standing under
provisions of Section 55-3-301 defining who is legally entitled to enforce a promissory
note); see also Key v. Chrysler Motors Corp., 1996-NMSC-038, ¶¶ 10-11, 121 N.M. 764,
918 P.2d 350 (determining that the question of whether a party has standing to sue is not
distinct from whether that party can assert a cause of action under a particular statute). The
UCC provides that there are three scenarios in which a person is entitled to enforce a
negotiable instrument such as a promissory note: (1) when that person is the holder of the
instrument; (2) when that person is a nonholder in possession of the instrument who has the
rights of a holder; and (3) when that person does not possess the instrument but is still
entitled to enforce it subject to the lost-instrument provisions of UCC Article 3. Section 55-
3-301. To show a “direct and concrete” injury, Deutsche Bank needed to establish that it fell
into one of these three statutory categories that would establish both its right to enforce
Homeowner’s promissory note and its basis for claiming that it suffered a direct injury from
Homeowner’s alleged default on the note. ACLU of N.M., 2008-NMSC-045, ¶ 19; see also
Bank of N.Y., 2014-NMSC-007, ¶ 19.

B.      Homeowner Did Not Waive the Issue of Standing

{15} Deutsche Bank contends that because standing was not a jurisdictional prerequisite
in this case, the issue “may be and was admitted and waived” because Homeowner
“ ‘acknowledge[d]’ ” Deutsche Bank’s allegation within its complaint that Deutsche Bank
owned both the note and the mortgage. We agree that our determination that standing is not
jurisdictional in this case opens up the possibility that Homeowner could have waived the
issue, but disagree that Homeowner waived it here.

{16} Arguments based on a lack of prudential standing are analogous to asserting that a
litigant has failed to state a legal cause of action. As we have previously discussed, we
generally require “injury in fact, causation, and redressability” to establish standing. ACLU
of N.M., 2008-NMSC-045, ¶ 10. If these elements are not met, as a logical matter, a plaintiff
generally cannot show that he or she has stated a cause of action entitling him or her to a
remedy. See Key, 1996-NMSC-038, ¶¶ 10-11. Thus, while a plaintiff’s failure to state a
cognizable claim for relief and a plaintiff’s lack of prudential standing are not strictly
jurisdictional, both implicate the “properly limited . . . role of courts in a democratic society”
and are relevant concerns throughout a litigation. New Energy Econ., Inc. v. Shoobridge,
2010-NMSC-049, ¶ 16, 149 N.M. 42, 243 P.3d 746 (internal quotation marks and citation
omitted). Under Rule 1-012(H)(2) NMRA, “[a] defense of failure to state a claim upon
which relief can be granted . . . may be made in any pleading permitted or ordered . . . or by

                                                7
motion for judgment on the pleadings, or at the trial on the merits.” We hold that Rule 1-
012(H)(2) applies to issues of prudential standing and precludes any waiver of standing prior
to the completion of a trial on the merits. Sundance Mech. & Util. Corp. v. Atlas,
1990-NMSC-031, ¶ 25, 109 N.M. 683, 789 P.2d 1250.

{17} In this case, Homeowner did not waive standing because he raised the issue in a
motion filed on August 11, 2010, over a month before the September 16, 2010 trial. In
addition, the district court considered Homeowner’s challenge to Deutsche Bank’s standing
during the trial on the merits. Homeowner therefore raised the issue of standing both by
motion and at the trial on the merits, either of which would independently constitute a timely
assertion of this defense. Rule 1-012(H)(2).

{18} Further, we are not convinced by Deutsche Bank’s argument that Homeowner waived
his right to challenge its standing because in his answer to Deutsche Bank’s complaint, he
“acknowledge[d]” Deutsche Bank’s allegation that it owned Homeowner’s note and
mortgage through assignment. Even under the generous assumption that Homeowner’s
“acknowledge[ment]” that Deutsche Bank was entitled to enforce the note was an admission
of that fact, we disagree with Deutsche Bank’s premise that Homeowner could have waived
this defense through his initial responsive pleading. When standing is a prudential
consideration, it can be raised for the first time at any point in an active litigation, just like
a defense of failure to state a claim, and unlike defenses relating to personal jurisdiction,
venue, and insufficient service of process, all of which must be raised in an initial or
amended responsive pleading. Compare Rule 1-012(H)(2) with Rule 1-012(H)(1).

{19} Moreover, it would be nonsensical to place any burden on a foreclosure defendant
to know whether the party seeking foreclosure is actually entitled to do so. For example, in
the present case, Homeowner signed his financing agreement with New Century; received
correspondence regarding his defaults on his mortgage payments from ASC, the loan
servicing company, which was apparently also the same company as Wells Fargo Bank,
N.A.; and he was ultimately sued by Deutsche Bank. Under these circumstances, there is no
indication that either Homeowner or any defendant being sued over a securitized mortgage,
for that matter, would be in a position to have personal knowledge of who had the right to
enforce his or her mortgage. In addition, as we will explain, allowing a foreclosure
defendant to waive the issue of standing would not only vitiate that homeowner’s rights, but
could in fact cloud the title of the underlying property and lead to other problems to the
detriment of New Mexico’s property system as a whole. Adam J. Levitin, The Paper Chase:
Securitization, Foreclosure, and the Uncertainty of Mortgage Title, 63 Duke L.J. 637, 662
(2013). The important societal interests in maintaining the integrity of the property system,
protecting subsequent purchasers of the property, and the minimal probative value of the
alternative, convince us that a foreclosure defendant cannot voluntarily waive a challenge

                                                8
to the plaintiff’s standing during the course of the litigation.2

C.      Standing Must Be Established as of the Date of Filing Suit in Mortgage
        Foreclosure Cases

{20} Before turning to a specific analysis of Deutsche Bank’s standing in this case, we will
clarify why standing must be established as of the time of filing suit in mortgage foreclosure
cases, despite our determination that standing is not a jurisdictional issue in such cases.
Bank of New York, relying on Lujan v. Defenders of Wildlife, 504 U.S. 555, 570-71, 570 n.5
(1992), states that “standing to bring a foreclosure action” must exist “at the time [a plaintiff]
file[s] suit.” 2014-NMSC-007, ¶ 17. Deutsche Bank asks this Court to revisit this
requirement, contending that (1) unlike in federal courts, standing in New Mexico courts is
not a jurisdictional issue such that standing does not necessarily have to exist at the time of
filing; and (2) as a prudential matter, requiring foreclosure plaintiffs to establish that they
had standing at the time of filing contravenes our interest in judicial economy. Neither
argument advanced by Deutsche Bank convinces us to deviate from well-established
principles of standing, which are solidly supported by several prudential and policy
considerations that arise in the particular context of mortgage foreclosure actions.

{21} There are sound policy reasons for requiring strict compliance with the traditional
procedural requirement that standing be established at the time of filing in mortgage
foreclosure actions. This procedural safeguard is vital because the securitization of
mortgages has given rise to a pervasive failure among mortgage holders to comply with the
technical requirements underlying the transfer of promissory notes, and more generally the
recording of interests in property. See Elizabeth Renuart, Uneasy Intersections: The Right
to Foreclose and the U.C.C., 48 Wake Forest L. Rev. 1205, 1209-10 (2013) (“[T]he failure
to deliver the original notes with proper indorsements [to assignees], the routine creation of
unnecessary lost note affidavits, the destruction of the original notes, and the falsification
of necessary indorsements . . . is widespread.”). Under these circumstances, not even the
plaintiffs may be sure if they actually own the notes they seek to enforce. As Professor
Levitin notes, Article 3 of the UCC and the land records recording system are each based
upon the notion of strict “compliance with demonstrative legal formalities to achieve
property rights,” which admittedly carries “up-front costs,” but also ensures “a high degree
of security in the property rights, both vis-à-vis other competing claimants to the property
rights and as to the ability to enforce the mortgage property rights.” Levitin, supra, at 648.
This regime is also desirable for its simplicity—“possession clarifies title because there can
be only one possessor at a time,” while “[i]ndorsement creates a chain of title that travels
with the instrument and provides an easy, objective manner for establishing who has rights
to the instrument.” Levitin, supra, at 662. These formalities are strengthened by strict
standing requirements. Otherwise, institutions could potentially cloud title by foreclosing

        2
         As we will explain in Section II, Part E, a foreclosure defendant effectively waives
his right to challenge the plaintiff’s standing once a final judgment has been entered.

                                                9
on a property upon which they do not possess the right to foreclose.3

{22} Indeed, standing in foreclosure actions “is not a mere procedural detail”; it protects
homeowners against double liability such as “when the wrong party sells the home and the
note holder later appears seeking full payment on the note,” or when a homeowner faces
multiple lawsuits in different jurisdictions. Renuart, supra, at 1212. Reducing the potential
for double liability is also beneficial to the property system at large because “[i]f a debtor
fears multiple satisfaction of the same debt, the debtor will not borrow, thereby chilling
economic activity,” whereas strict compliance with UCC requirements “enables verification
of the terms of the obligation[,] and hence greater ability to enforce[, and] provid[es] a
mechanism for verifying the discharge of the obligation.” Levitin, supra, at 664. In our
view, the minor up-front compliance costs that foreclosure plaintiffs will incur by confirming
that they have the proper documentation before filing suit are a small price to pay for
protecting the rights of New Mexico homeowners and the integrity of the State’s title system
by requiring strict and timely compliance with long-standing property law requirements. To
be clear, perhaps despite recent industry practices, this is not an additional requirement that
we impose punitively; it is simply a symptom of compliance with long-standing rules. See
Levitin, supra, at 650-51 (“A mortgage loan involves a bundle of rights, including
procedural rights. These procedural rights are not merely notional; they are explicitly priced
by the market. Mortgage finance availability and pricing is statistically correlated with
variations in procedural protections for borrowers. Retroactively liberalizing the rules for
mortgage enforcement creates an unearned windfall for mortgagees.” (footnote omitted)).
In other words, requiring that standing be established as of the time of filing provides strong
and necessary incentives to help ensure that a note holder will not proceed with a
foreclosure action before confirming that it has a right to do so.

{23} Further, although we are sympathetic to the additional burdens this may impose on
an entity seeking to foreclose on a home, New Mexico is hardly alone among the states in
requiring a foreclosure plaintiff to prove that it was entitled to enforce the note when it filed
suit. See Levitin, supra, at 642-44 (“[T]here is broad agreement among courts that some sort
of standing or similar status is necessary for both judicial and nonjudicial foreclosure . . . .
There is also broad agreement that the party bringing the foreclosure action or sale must have
standing at the time the litigation . . . is commenced.” (emphasis added) (footnote omitted)).

        3
         Professor Levitin illustrates this idea with the following example:

        If the seller is not the person entitled to foreclose, the foreclosure sale is no
        different from a sale of the Brooklyn Bridge. Accordingly, the foreclosure-
        sale purchaser has no ability to transfer title to the property, no matter [his or]
        her equities, because [he or] she lacks title, just like the hapless buyer of the
        Brooklyn Bridge.

Levitin, supra, at 646.

                                                10
For example, in Federal Home Loan Mortgage Corp. v. Schwartzwald, 2012-Ohio-5017, ¶¶
24-25, 979 N.E.2d 1214, overruling on other grounds recognized by Bank of New York
Mellon v. Grund, 2015-Ohio-466, ¶¶ 23-24, 27 N.E.3d 555, the Supreme Court of Ohio
clarified that, under Ohio law, standing must be analyzed as of the commencement of an
action in mortgage foreclosure cases. See also U.S. Bank Nat’l Ass’n v. McConnell, 305
P.3d 1, 8 (Kan. Ct. App. 2013) (concluding that the foreclosure plaintiff had standing
because it was undisputed that the plaintiff held the note prior to the date that suit was filed).
Therefore, “[p]ost-filing events that supply standing that did not exist on filing may be
disregarded . . . despite a showing of sufficient present injury caused by the challenged acts
and capable of judicial redress.” Fed. Home Loan Mortg. Corp., 2012-Ohio-5017, ¶ 26 (first
alteration in original) (internal quotation marks and citation omitted). The Supreme Court
of Oklahoma has similarly explained that if a foreclosure plaintiff “became a person entitled
to enforce the note . . . after the foreclosure action was filed,” the plaintiff’s initial lack of
standing could not be cured and the proper remedy was to dismiss the case without
prejudice. Deutsche Bank Nat’l Tr. v. Brumbaugh, 2012 OK 3, ¶ 11, 270 P.3d 151; see also
McLean v. JP Morgan Chase Bank Nat’l Ass’n, 79 So. 3d 170, 173 (Fla. Dist. Ct. App.
2012) (“While it is true that standing to foreclose can be demonstrated by the filing of the
original note with a special endorsement in favor of the plaintiff, this does not alter the rule
that a party’s standing is determined at the time the lawsuit was filed. Stated another way,
the plaintiff’s lack of standing at the inception of the case is not a defect that may be cured
by the acquisition of standing after the case is filed.” (internal quotation marks and citation
omitted)); Deutsche Bank Nat’l Tr. Co. v. Mitchell, 27 A.3d 1229, 1234-36 (N.J. Super. Ct.
App. Div. 2011) (stating that a plaintiff must have standing at the time the foreclosure
complaint is filed, and a lack of standing cannot be cured by showing that a plaintiff acquired
standing after the complaint was filed); Wells Fargo Bank, N.A. v. Marchione, 887 N.Y.S.2d
615, 616-17 (N.Y. App. Div. 2009) (noting that a plaintiff-assignee lacked standing where
the note and mortgage were assigned to the plaintiff after commencement of the foreclosure
action); U.S. Bank Nat’l Ass’n v. Kimball, 2011 VT 81, ¶¶ 12-20, 27 A.3d 1087 (stating that
standing must be established at the time of filing suit, and it did not contravene the interest
of judicial efficiency to dismiss the complaint of a foreclosure plaintiff who acquired
standing after the complaint had been filed). As a result, we conclude that it is not
presumptuous to require, as do a substantial number of other states, that a company claiming
to be a mortgage holder must produce proof that it was entitled to enforce the underlying
promissory note prior to the commencement of the foreclosure action by, for example,
attaching a note containing an undated indorsement to the initial complaint or producing a
note dated before the filing of the complaint at some appropriate time in the litigation. We
agree with the Vermont Supreme Court, which opined that “[i]t is neither irrational nor
wasteful to expect a foreclosing party to actually be in possession of its claimed interest in
the note, and have the proper supporting documentation in hand when filing suit.” Kimball,
2011 VT 81, ¶ 20.

{24} Deutsche Bank also argues that our insistence that it demonstrate that a note indorsed
in blank was indorsed prior to the time of filing improperly adds a new requirement that
indorsements be dated, in contravention of the UCC. See Deutsche Bank Nat’l Tr. Co.,

                                               11
2014-NMCA-090, ¶ 12 (holding that “if [a] lender produces the indorsed note after filing the
complaint, the indorsement must be dated to show that the indorsement was executed prior
to the initiation of the foreclosure suit”). We agree with Deutsche Bank that the UCC does
not require that instruments be dated. See NMSA 1978, § 55-3-113(b) (1992) (“If an
instrument is undated, its date is the date of its issue or, in the case of an unissued
instrument, the date it first comes into possession of a holder.”). However, Deutsche Bank
conflates the need to date a negotiable instrument, so as to create an enforceable promissory
note, with the requirement that Deutsche Bank establish that it was entitled to enforce the
instrument at the time of filing. Because the time of filing requirement does not affect the
validity of an underlying negotiable instrument, see Deutsche Bank Nat’l Tr. Co., 2014-
NMCA-090, ¶ 12, this rule does not add a new requirement under the UCC.

{25} Deutsche Bank additionally contends that “when a plaintiff presents the original note
to the court with a blank indorsement, the plaintiff establishes it is then the holder of the
note, and is entitled to enforce the note and foreclose the mortgage.” Deutsche Bank is
correct that the holder of a note indorsed in blank may, as a general matter, enforce the note.
See § 55-3-301; NMSA 1978, § 55-3-205(b) (1992). However, Deutsche Bank again
conflates two distinct concepts: whether it may, as the holder of a note indorsed in blank,
enforce the note and whether it can establish that it owned the note at the time of filing. If
Deutsche Bank had presented a note indorsed in blank with its initial complaint, it would be
entitled to a presumption that it could enforce the note at the time of filing and thereby
establish standing. However, Deutsche Bank did not produce a note indorsed in blank when
it filed suit in this case, and the subsequent production of a blank note does not prove that
Deutsche Bank possessed the blank note when it filed suit.

{26} We further disagree with Deutsche Bank’s argument that the Court of Appeals’s
opinion in this case, Deutsche Bank Nat’l Tr. Co., 2014-NMCA-090, ¶¶ 11-13, requires that
a “plaintiff conclusively establish its standing upon first filing the complaint.” Deutsche
Bank contends that this requirement would contravene well-established notice pleading
standards in New Mexico, which require a complaint to contain only “a short and plain
statement of the claim showing that the pleader is entitled to relief.” Rule 1-008(A)(2)
NMRA. According to Deutsche Bank, it should satisfy minimum pleading requirements for
a foreclosure plaintiff to merely allege that it is the holder of the note, and then later prove
this fact through more detailed documentation, either at trial or in connection with a
dispositive motion. We agree with Deutsche Bank that “it is only at trial or in a dispositive
motion that plaintiffs are required to prove the necessary elements of their claims,” including
standing, and that a bare statement that the plaintiff holds the note may satisfy pleading
standards. See N.M. Pub. Sch. Ins. Auth. v. Arthur J. Gallagher & Co., 2008-NMSC-067,
¶ 11, 145 N.M. 316, 198 P.3d 342 (“In reviewing the district court’s decision to dismiss for
failure to state a claim, we accept as true all well-pleaded factual allegations in the complaint
and resolve all doubts in favor of the complaint’s sufficiency.”).

{27} However, this is an issue of proof rather than pleading standards. The elements of
standing

                                               12
        are not mere pleading requirements but rather an indispensable part of the
        plaintiff’s case, [and therefore] each element must be supported in the same
        way as any other matter on which the plaintiff bears the burden of proof, i.e.,
        with the manner and degree of evidence required at the successive stages of
        the litigation.

Lujan, 504 U.S. at 561. For example, a foreclosure plaintiff may satisfy pleading
requirements by simply alleging that it is the holder of the note without attaching any
additional documentary evidence, but when a defendant subsequently raises the defense that
the plaintiff lacks standing to foreclose, the plaintiff must then prove that it held the note at
the time of filing. Attaching the note to the complaint is not the only means of proving that
the plaintiff held the note at the time of filing because standing can also be proven through
a dated indorsement establishing when the note was indorsed to the plaintiff. Therefore,
neither Bank of New York nor the Court of Appeals’s opinion in this case establish an
additional pleading requirement, as Deutsche Bank argues, but rather set forth requirements
that must be met to prove standing, should that issue be raised by the defendant or sua sponte
by the Court.4

D.      Deutsche Bank Did Not Establish Standing

{28} Deutsche Bank argues that substantial evidence supports the district court’s
determination that Deutsche Bank had standing to pursue its foreclosure complaint against
Homeowner. We review the district court’s determination that Deutsche Bank had standing
under a substantial evidence standard of review. Bank of N.Y., 2014-NMSC-007, ¶ 18.
“ ‘Substantial evidence’ means relevant evidence that a reasonable mind could accept as
adequate to support a conclusion. This Court will resolve all disputed facts and indulge all
reasonable inferences in favor of the trial court’s findings.” Id. (internal quotation marks and
citations omitted). However, “[w]hen the resolution of the issue depends upon the
interpretation of documentary evidence, this Court is in as good a position as the trial court
to interpret the evidence.” Id. (alteration in original) (internal quotation marks and citation
omitted).

{29} Deutsche Bank contends that there was sufficient evidence to establish standing for
two reasons. First, Deutsche Bank argues that “the Assignment of Mortgage in this case . . .
evidence[d] the timing of the transfer of the note.” Second, Deutsche Bank avers that other
corroborating evidence presented at trial, in conjunction with the assignment of mortgage,
established that it owned the note at the time of filing. Deutsche Bank’s arguments do not
persuade us that there is substantial evidence to support the district court’s determination that

        4
        In instances where a foreclosure plaintiff seeks a default judgment, courts should
raise the standing issue sua sponte and carefully scrutinize the plaintiff’s standing to
safeguard the integrity of New Mexico’s property system and protect subsequent bona fide
purchasers.

                                               13
Deutsche Bank had standing.

{30} In response to Homeowner’s motion to dismiss for lack of standing, Deutsche Bank
produced an assignment of mortgage dated February 7, 2006. Deutsche Bank’s proffer of
the February 7, 2006 assignment of mortgage in this case was insufficient to establish
standing because (1) the assignment of mortgage does not establish that Deutsche Bank was
injured for the purposes of standing; and (2) it does not prove if or when the note was
transferred. As we have previously stated, to establish standing we require that a plaintiff
show that he or she has actually suffered a direct and concrete injury. ACLU of N.M.,
2008-NMSC-045, ¶ 19 (citation omitted). “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.” BAC Home Loans
Servicing, LP v. McFerren, 2013-Ohio-3228, ¶ 12, 6 N.E.3d 51 (citing Restatement (Third)
of Prop.: Mortgages § 5.4(e), at 385 (1996) (“[I]n general a mortgage is unenforceable if it
is held by one who has no right to enforce the secured obligation.”)). Consequently,
“possession of the mortgage is of no import unless there is possession of the note.” BAC
Home Loans Servicing, LP, 2013-Ohio-3228, ¶ 12. Moreover, because an assignment of
mortgage does not “effect an assignment of a note,” an assignment of mortgage does not
prove “transfer of [a] note.” Bank of Am., NA v. Kabba, 2012 OK 23, ¶ 9, 276 P.3d 1006.
As a result, the date that Homeowner’s mortgage was assigned to Deutsche Bank does not
establish a corresponding date indicating when the note was transferred to Deutsche Bank,
or even if the note was transferred.

{31} Deutsche Bank’s proffer of additional evidence to establish standing similarly fails
to meet the threshold for substantial evidence. First, Deutsche Bank contends that because
Ms. Roesch, an employee of a loan servicing company, “testified that the Assignment of
Mortgage was dated February 7, 2006,” Deutsche Bank established ownership of the note
at the time of filing. Once again, this assertion fails because the date on the assignment of
mortgage does not establish either when or whether Deutsche Bank obtained the right to
enforce the note. See id. Second, Deutsche Bank argues that Ms. Roesch’s testimony that
her company began servicing the note in 2006 proves that Deutsche Bank owned the note
prior to its February 2009 complaint. This testimony does not establish that Deutsche Bank
had standing. Again, the assertion that an entity allegedly started servicing the loan on
behalf of Deutsche Bank prior to the time of filing suit does not prove anything regarding
the actual ownership of the note, and further, because “falsification of necessary
indorsements” appears to be a “widespread” phenomenon, Renuart, supra, at 1210, there is
reason to believe that creditors could potentially seek to enforce notes that they do not hold
under the law. Thus, the additional evidence supplied by Deutsche Bank does not bear on
whether Deutsche Bank actually owned the note at the time of filing, nor does it establish
when the necessary indorsements were made, so that whether Deutsche Bank had the right
to enforce the note as of February 24, 2009 remains unclear.

{32} Finally, the unindorsed note attached to Deutsche Bank’s original complaint did not
establish standing. “Possession of an unindorsed note made payable to a third party does not

                                             14
establish the right of enforcement, just as finding a lost check made payable to a particular
party does not allow the finder to cash it.” Bank of N.Y., 2014-NMSC-007, ¶ 23. In
addition, as we have discussed, the undated indorsed note that Deutsche Bank presented at
trial did not prove that Deutsche Bank had standing when it filed its complaint. Because
Deutsche Bank failed to provide evidence establishing its right to enforce the note on
Homeowner’s home, we hold that the district court’s determination that Deutsche Bank
established standing to foreclose was not supported by substantial evidence, and we
accordingly reverse the district court’s decision and affirm the result reached by the Court
of Appeals.

E.      Completed Foreclosure Judgments Should Not Be Voided for Lack of Standing

{33} We also take this opportunity to address Deutsche Bank’s assertion that “several
lower courts . . . have vacated long-completed foreclosure judgments under Rule 1-060(B)
NMRA[,] holding they are ‘void’ for lack of subject matter jurisdiction.” To avoid this issue
in the future, we will clarify the practical implications of our holding that standing is not
jurisdictional in mortgage foreclosure cases.

{34} “Jurisdiction of the subject matter and of the parties is the right to hear and determine
the suit or proceeding in favor of or against the respective parties to it.” Sundance Mech. &
Util. Corp., 1990-NMSC-031, ¶ 22 (internal quotation marks and citations omitted). Further,
a party can raise subject matter jurisdiction at any time, even through a collateral attack
alleging that a final judgment is void for lack of subject matter jurisdiction. Chavez v. Cty.
of Valencia, 1974-NMSC-035, ¶ 15, 86 N.M. 205, 521 P.2d 1154; see also Rule 1-012(H)(3)
(“Whenever it appears . . . that the court lacks jurisdiction of the subject matter, the court
shall dismiss the action.” (emphasis added)). However, as we have previously discussed,
a challenge to standing is in many ways analogous to a defense for failure to state a claim
because it does not deprive the court of subject matter jurisdiction over the case, but instead
bears on whether the plaintiff has stated a cognizable claim for relief. A failure to state a
claim may only be raised “during the pendency of the action,” including on appeal,
Sundance Mech. & Util. Corp., 1990-NMSC-031, ¶ 25, but it cannot be the basis for a
collateral attack on a final judgment. See Palmer v. Palmer, 2006-NMCA-112, ¶¶ 13-22,
140 N.M. 383, 142 P.3d 971 (considering whether a court which entered a settlement
agreement between the parties had subject matter jurisdiction, but refusing to consider after
the entry of the judgment whether one party had failed to state a claim). Therefore, a final
judgment from a cause of action that may have lacked standing as a jurisdictional matter may
be subject to a collateral attack, while a final judgment on any other cause of action,
including an action to enforce a promissory note such as this case, is not voidable under Rule
1-060(B) due to a lack of prudential standing.

III.   CONCLUSION

{35} For the foregoing reasons, we affirm the judgment of the Court of Appeals and
remand this matter to the district court with instructions to vacate its judgment of foreclosure

                                              15
against Homeowner.

{36}   IT IS SO ORDERED.

                                    ____________________________________
                                    EDWARD L. CHÁVEZ, Justice

WE CONCUR:

____________________________________
BARBARA J. VIGIL, Chief Justice

____________________________________
PETRA JIMENEZ MAES, Justice

____________________________________
CHARLES W. DANIELS, Justice

____________________________________
JUDITH K. NAKAMURA, Justice

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