March 04, 2015 – Deutsche Bank National Trust Company as Trustee of the Residential Asset Securitization Trust 2006-A9CB, Mortgage Pass-Through Certificates, Series 2006-I Under the Pooling and Servicing Agreement Dated July 1, 2006, No. 33,263

IN THE COURT OF APPEALS OF THE STATE OF NEW MEXICO	1
Opinion Number:	2
Filing Date: 	MARCH 4, 2015	3
NO. 33,263	4
DEUTSCHE BANK NATIONAL TRUST COMPANY	5
AS TRUSTEE OF THE RESIDENTIAL ASSET	6
SECURITIZATION TRUST 2006-A9CB, MORTGAGE	7
PASS-THROUGH CERTIFICATES, SERIES 2006-I	8
UNDER THE POOLING AND SERVICING	9
AGREEMENT DATED JULY 1, 2006,	10
Plaintiff-Appellee,	11
v.	12
RICHARD MACLAURIN and KRISTIN LUNDGREN,	13
Defendants-Appellants.	14
APPEAL FROM THE DISTRICT COURT OF SANTA FE COUNTY	15
Sarah M. Singleton, District Judge	16
Johnson Law Firm, LC	17
Thomas L. Johnson	18
Andrew L. Johnson	19
Albuquerque, NM	20
for Appellee	21
Garner Law Firm	22
N. Ana Garner	23
Santa Fe, NM	24
for Appellants	25

OPINION	1
FRY, Judge.	2
{1} 	Defendants (Borrowers) appeal the district court’s order granting Deutsche	3
Bank National Trust Company’s motion for summary judgment in a foreclosure	4
action. Borrowers argue that Deutsche Bank did not validly hold their note and	5
mortgage prior to initiating foreclosure proceedings and therefore did not have	6
standing to foreclose on their property. Specifically, Borrowers argue that the	7
mortgage was transferred to Deutsche Bank in violation of a pooling and servicing	8
agreement (PSA) governing the trust and that the transfer was therefore void. Because	9
Borrowers were neither parties to nor third-party beneficiaries of the PSA, we	10
conclude that they cannot challenge alleged violations of the PSA, and we affirm the	11
district court.	12
BACKGROUND	13
{2} 	In 2006, Borrowers executed a promissory note in the amount of $250,000. The	14
note was secured by a mortgage covering Borrowers’ property. The note was initially	15
made payable to Plaza Home Mortgage. The note was then indorsed to IndyMac Bank	16
F.S.B., which then indorsed the note in blank. The mortgage was assigned to Deutsche	17
Bank on September 13, 2010. Borrowers defaulted on the note, and Deutsche Bank	18
initiated foreclosure proceedings on September 27, 2010. Deutsche Bank subsequently	19

1Williams did provide a link to a pooling and servicing agreement posted on the
U.S. Securities and Exchange Commission website. At the time of this Opinion, the
file supposedly existing at the link provided was unavailable.
2
moved for summary judgment. In its statement of undisputed material facts, Deutsche	1
Bank stated that it was the holder of the note and mortgage and was therefore the party	2
entitled to foreclose on Borrowers’ property.	3
{3} 	In response to the motion for summary judgment, Borrowers attached an	4
affidavit by Patrick Williams, offered as an expert in the mortgage banking industry.	5
Williams stated that based on his review of the relevant documents, the trust that the	6
mortgage was assigned to prior to the foreclosure proceedings closed in July 2006.	7
Because the trust closed in 2006 and the assignment of mortgage to the trust occurred	8
in 2010, Williams concluded that the trustee—Deutsche Bank—no longer had	9
authority to accept loan collateral and that the assignment of mortgage was therefore	10
likely in violation of the PSA. Borrowers did not attach a copy of the PSA to their	11
motion or otherwise make it a part of the record. 1
12
{4} 	The district court concluded that the undisputed material facts established that	13
Deutsche Bank was the holder of the note and had standing to foreclose. The district	14
court further concluded that any alleged violations of the PSA were immaterial	15
because Borrowers were precluded from challenging Deutsche Bank’s compliance or	16

3
lack of compliance with the PSA. Accordingly, the district court granted summary	1
judgment. Borrowers appeal.	2
DISCUSSION	3
Standard of Review	4
{5} 	The appellate courts “review[ ] de novo an order granting or denying summary	5
judgment.” United Nuclear Corp. v. Allstate Ins. Co., 2012-NMSC-032, ¶ 9, 285 P.3d	6
644. “Summary judgment is appropriate where there are no genuine issues of material	7
fact and the movant is entitled to judgment as a matter of law.” Montgomery v. Lomos	8
Altos, Inc., 2007-NMSC-002, ¶ 16, 141 N.M. 21, 150 P.3d 971 (internal quotation	9
marks and citation omitted). “On review, [the appellate courts] examine the whole	10
record for any evidence that places a genuine issue of material fact in dispute, and we	11
view the facts in a light most favorable to the party opposing the motion and draw all	12
reasonable inferences in support of a trial on the merits[.]” Handmaker v. Henney,	13
1999-NMSC-043, ¶ 18, 128 N.M. 328, 992 P.2d 879 (internal quotation marks and	14
citation omitted). “The burden rests on the party moving for summary judgment to	15
establish that no genuine issue of material fact exists for trial and that the movant is	16
entitled to judgment as a matter of law.” C & H Constr. & Paving Co. v. Citizens	17
Bank, 1979-NMCA-077, ¶ 9, 93 N.M. 150, 597 P.2d 1190.	18

4
Deutsche Bank Was the Proper Party to Foreclose	1
{6} 	Borrowers argue that Deutsche Bank did not have standing to foreclose on their	2
property because the assignment of mortgage was dated four years after the closing	3
date of the Deutsche Bank trust, and a transfer of assets into the trust after the closing	4
date of the trust violated the trust’s PSA. Borrowers further argue that the trust was	5
prohibited from accepting non-performing loans, such as Borrowers’ loan at the time	6
it was assigned to Deutsche Bank. Borrowers argue that transfers that violate the terms	7
of the PSA are void and, therefore, under our Supreme Court’s recent decision in Bank	8
of New York v. Romero, 2014-NMSC-007, 320 P.3d 1, Deutsche Bank does not have	9
standing to enforce a note and mortgage that it never validly held.	10
{7} 	As an initial matter, Borrowers’ argument differs from the issue presented in	11
Romero. In relevant part, the Court in Romero held that the bank did not have standing	12
to foreclose because the note in the bank’s possession contained two undated	13
indorsements, one in blank and one that specifically indorsed the note to a different	14
entity. Id. ¶ 26; see also id. ¶ 21 (stating that in the context of third-party enforcement	15
of a note, possession of the negotiable instrument does not necessarily make that party	16
a “holder” with rights of enforcement). The Court concluded that the specific	17
indorsement controlled, and the bank could not rely on the blank indorsement,	18
together with its possession of the note, to establish standing. Id. ¶ 26.	19

5
{8} 	That is not the situation in this case. It was undisputed below that Deutsche	1
Bank was the holder, at least in terms of the issue presented in Romero, because it	2
possessed the note indorsed in blank. Id. ¶ 26 (“[W]e agree with the [b]ank that if the	3
Romeros’ note contained only a blank indorsement from Equity One, that blank	4
indorsement would have established the [b]ank as a holder because the [b]ank would	5
have been in possession of bearer paper[.]”). Instead, the issue here is whether a	6
defendant in a foreclosure action can challenge alleged violations of a PSA—an	7
agreement it is neither a party to nor a third-party beneficiary of—in order to establish	8
that the lending institution is not a valid holder of the loan documents and thus is not	9
the proper party to foreclose.	10
{9} 	As the district court concluded, the great weight of authority holds that a	11
mortgagor who is not a party to or a third-party beneficiary of the agreement	12
governing the trust is not the proper party to challenge such alleged violations. See In	13
re Walker, 466 B.R. 271, 285 (Bankr. E.D. Pa. 2012) (“[I]t appears that a judicial	14
consensus has developed holding that a borrower lacks standing to . . . request a	15
judicial determination that a loan assignment is invalid due to noncompliance with a	16
pooling and servicing agreement, when the borrower is neither a party to nor a third[-	17
]party beneficiary of the securitization agreement, i.e., the PSA.”); Bank of Am. Nat’l	18
Ass’n v. Bassman FBT, L.L.C., 981 N.E.2d 1, 7 (Ill. App. Ct. 2012) (collecting cases	19

6
holding that “the rule that a third[-]party typically lacks standing to challenge . . . an	1
assignment [that violates a PSA] is widely accepted”); Reinagel v. Deutsche Bank	2
Nat’l Trust Co., 735 F.3d 220, 228 (5th Cir. 2013) (holding that the plaintiffs could	3
not challenge alleged violations of a PSA in a mortgage foreclosure action because	4
they were not a party to the PSA and therefore had “no right to enforce its terms”); In	5
re Correia, 452 B.R. 319, 324 (B.A.P. 1st Cir. 2011) (holding that mortgagors could	6
not challenge mortgage assignment based on non-compliance with the PSA because	7
they were not parties or third-party beneficiaries of the PSA’s terms).	8
{10} 	Borrowers, however, base their argument on an exception that allows a	9
mortgagor to challenge an assignment when the assignment is void as a matter of law,	10
not merely voidable. See Culhane v. Aurora Loan Servs. of Neb., 708 F.3d 282, 291	11
(1st Cir. 2013) (holding that a “mortgagor has standing to challenge a mortgage	12
assignment as invalid, ineffective, or void (if, say, the assignor had nothing to assign	13
or had no authority to make an assignment to a particular assignee)” but cannot	14
“challenge shortcomings in an assignment that render it merely voidable at the	15
election of one party but otherwise effective to pass legal title”). Borrowers cite two	16
cases they argue establish that assignments in contravention of a PSA are void: Wells	17
Fargo Bank, N.A. v. Erobobo, No. 31648/2009, 2013 WL 1831799 (N.Y.Sup.Ct. Apr.	18
29, 2013) (unreported decision), and Glaski v. Bank of Am., N.A., 160 Cal. Rptr. 3d	19

7
449 (Ct. App. 2013). The court in Erobobo held that the transfer of loan documents	1
into a trust in violation of the trust’s PSA voided the assignment and created material	2
issues of fact as to whether the plaintiff was the proper party to foreclose. Erobobo,	3
2013 WL 1831799, at *7-9. In reaching its holding, the Erobobo court strictly	4
construed a New York state statute as voiding “every sale, conveyance[,] or other act	5
of the trustee in contravention of the trust.” Id. at *8 (citing Est. Powers & Trusts §	6
7-2.4). In reliance on Erobobo and its interpretation of New York trust law, the court	7
in Glaski similarly concluded that an assignment in violation of the trust’s PSA was	8
void and that the mortgagor therefore had standing to challenge the validity of the	9
assignment. 160 Cal. Rptr. 3d at 463-64. The court held that because the transfer was	10
void, the borrower had standing to challenge it regardless of whether he was a party	11
or third-party beneficiary to any of the agreements. Id. at 452 (“Transfers that violate	12
the terms of the trust instrument are void under New York trust law, and borrowers	13
have standing to challenge void assignments of their loans even though they are not	14
a party to, or a third[-]party beneficiary of, the assignment agreement.”).	15
{11} 	However, Erobobo and Glaski appear to be anomalies in the body of case law	16
analyzing this issue, and they have been roundly criticized for their interpretation of	17
New York trust law. See Rajamin v. Deutsche Bank Nat’l Trust. Co., 757 F.3d 79, 90	18
(2d Cir. 2014) (“[W]e are not aware of any New York appellate decision that has	19

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endorsed [Erobobo’s] interpretation of Est. Powers & Trusts § 7-2.4. And most courts	1
in other jurisdictions discussing that section have interpreted New York law to mean	2
that a transfer into a trust that violates the terms of a PSA is voidable rather than	3
void[.]” (internal quotation marks and citation omitted)); Espey v. Nationstar Mortg.,	4
LLC, Civ. No. 13-2979 ADM/JSM, 2014 WL 2818657, at *8 (D. Minn. June 19,	5
2014) (“[T]he majority of courts that have examined Erobobo have criticized the	6
decision and held that under New York law, an assignment of a mortgage into a trust	7
in violation of the terms of the PSA is voidable, and not void, as the action can be	8
ratified by the beneficiaries.”); Tran v. Bank of N.Y., No. 13 Civ. 580, 2014 WL	9
1225575, *4-5 (S.D.N.Y. Mar. 24, 2014) (stating that Erobobo and Glaski “run	10
counter to better-reasoned cases, which apply the rule that a beneficiary can ratify a	11
trustee’s ultra vires act”); Davis v. Countrywide Home Loans, Inc., 1 F. Supp. 3d 638,	12
644 (S.D. Tex. 2014) (“Although [Est. Powers & Trusts § 7-2.4] uses the term ‘void’,	13
courts applying the law have treated improper transfers as subject to ratification and	14
therefore voidable[.]”). Given these authorities, we decline to adopt Erobobo’s and	15
Glaski’s conclusion that transfers in violation of a PSA void the transfer and give rise	16
to permissible challenges by mortgagors.	17
{12} 	Nevertheless, Borrowers argue that because the PSA in this case was formed	18
under New York law, the Erobobo decision is binding authority. We are unpersuaded	19

9
for two reasons. First, the only factual support in the record for Borrowers’ argument	1
is Borrowers’ own assertion. See Durham v. Guest, 2009-NMSC-007, ¶ 10, 145 N.M.	2
694, 204 P.3d 19 (stating that “reference to facts not before the district court and not	3
in the record is inappropriate and a violation of our Rules of Appellate Procedure”).	4
The PSA was not made part of the record, and the internet link provided in Williams’	5
affidavit falls short of the requirements of Rule 1-056(E) NMRA that “[s]worn or	6
certified copies of all papers or parts thereof referred to in an affidavit shall be	7
attached thereto or served therewith.” Second, Borrowers’ argument that Erobobo is	8
controlling New York law is not accurate. Erobobo is an unpublished supreme court	9
decision (equivalent, in many respects, to a New Mexico state district court).	10
However, a recent memorandum decision by the supreme court appellate division	11
(New York’s intermediate appellate court) concluded that the mortgagors “did not	12
have standing to assert noncompliance with the subject lender’s pooling service	13
agreement.” Bank of N.Y. Mellon v. Gales, 982 N.Y.S.2d 911, 912 (N.Y. App. Div.	14
2014). Gales does not engage in a lengthy analysis of this issue, but it cannot be said,	15
as Borrowers contend, that Erobobo represents the last word on this point in New	16
York law.	17
{13} 	In conclusion, given the judicial consensus regarding a mortgagor’s lack of	18
authority to challenge the transfer of loan documents that allegedly violate a PSA, we	19

10
hold that Borrowers failed to raise a genuine issue of material fact as to whether	1
Deutsche Bank was the proper party to foreclose.	2
CONCLUSION	3
{14} 	For the foregoing reasons, we affirm the district court.	4
{15} 	IT IS SO ORDERED.	5
6
CYNTHIA A. FRY, Judge	7
WE CONCUR:	8
9
MICHAEL E. VIGIL, Chief Judge	10
11
JONATHAN B. SUTIN, Judge	12