April 2, 2020- HSBC Bank USA v. David W. Wiles, No. A-1-CA-36567

Corrections to this opinion/decision not affecting the outcome, at the Court's discretion, can occur up to the time of publication
with NM Compilation Commission. The Court will ensure that the electronic version of this opinion/decision is updated
accordingly in Odyssey.
IN THE COURT OF APPEALS OF THE STATE OF NEW MEXICO	1
Opinion Number:__________________	2
Filing Date: APRIL 2, 2020	3
No.: A-1-CA-36567	4
HSBC BANK USA, NATIONAL	5
ASSOCIATION as Trustee for	6
WELLS FARGO ASSET	7
SECURITIES CORPORATION,	8
MORTGAGE ASSET-BACK PASS-	9
THROUGH CERTIFICATES SERIES	10
2007-PA3,	11
Plaintiff-Appellee,	12
v.	13
DAVID W. WILES,	14
Defendant-Appellant.	15
APPEAL FROM THE DISTRICT COURT OF SANTA FE COUNTY	16
Sarah M. Singleton, District Judge	17
Snell & Wilmer L.L.P.	18
Gregory J. Marshall	19
Sandra A. Brown	20
Albuquerque, NM	21
for Appellee	22
Garner Law Firm	23
N. Ana Garner	24
Santa Fe, NM	25
for Appellant	26
Court of Appeals of New Mexico
Filed 4/2/2020 11:28 AM

OPINION	1
DUFFY, Judge.	2
{1} 	This is a residential foreclosure case. Defendant David Wiles appeals the	3
district court’s order granting summary judgment in favor of Plaintiff HSBC Bank	4
USA (HSBC), on HSBC’s complaint to enforce Defendant’s promissory note and	5
foreclose his mortgage. Defendant contends that HSBC had no right to foreclose his	6
mortgage as a result of an unrecorded assignment of mortgage from the original	7
lender, Wells Fargo Bank, N.A. (Wells Fargo), to another entity before Wells Fargo	8
later assigned the same mortgage to HSBC. For the reasons set forth below, we	9
affirm.	10
BACKGROUND	11
{2} 	On January 19, 2007, Defendant executed a promissory note (the Note) in	12
favor of Wells Fargo. The Note is indorsed in blank. It is secured by a mortgage	13
(Mortgage) executed by Defendant on the same day. An assignment of mortgage	14
(Assignment), transferring the Mortgage from Wells Fargo to HSBC, was recorded	15
in Santa Fe County on June 13, 2012.	16
{3} 	On August 13, 2012, HSBC filed a complaint for enforcement of the Note and	17
foreclosure of the Mortgage. The Note, Mortgage, and Assignment were attached to	18
HSBC’s complaint. The district court denied HSBC’s initial motion for summary	19
judgment on the ground that material issues of fact precluded summary judgment.	20

2
{4} 	On May 9, 2016, by agreement of the parties, Defendant inspected his loan	1
file at HSBC’s counsel’s office. Defendant was allowed to inspect and copy the	2
Note, Mortgage, and Assignment. In the file, Defendant also found an unrecorded	3
assignment of the mortgage (Unrecorded Assignment), dated January 19, 2007—the	4
same date Defendant executed the Note and Mortgage—from Wells Fargo to U.S.	5
Bank, N.A. as trustee. Because HSBC would not allow Defendant to copy that	6
document, Defendant filed a motion to compel production of the Unrecorded	7
Assignment 	and other documents defense counsel 	allegedly saw in HSBC’s	8
counsel’s files. Four days later, HSBC filed a second motion for summary judgment.	9
{5} 	The district court granted Defendant’s motion to compel in part, ordering the	10
production of the Unrecorded Assignment but declining to compel the production of	11
any additional documents. HSBC produced the Unrecorded Assignment later that	12
day. The court also ordered the parties to submit supplemental briefing on HSBC’s	13
second 	motion 	for 	summary 	judgment 	discussing 	the 	effect, 	if 	any, 	of 	the	14
Unrecorded Assignment. Defendant, in his supplemental response, argued that the	15
Unrecorded Assignment created a genuine issue of material fact regarding HSBC’s	16
ownership of the Mortgage, and further, that if HSBC “cannot prove timely	17
ownership of the mortgage, even though it may be able to prove timely ownership	18
of the Note alone, [HSBC] has an enforceable negotiable instrument but not the right	19
to foreclose on the mortgage. It is left with an unsecured obligation.”	20

3
{6} 	After a hearing, the district court granted HSBC’s motion in part and denied	1
it in part. The court found HSBC had standing to execute on the Note, that Defendant	2
was in default, and awarded HSBC a money judgment with interest. The court	3
denied HSBC’s request for summary foreclosure of the Mortgage, however, because	4
genuine issues of material fact remained concerning the effect, if any, of the	5
Unrecorded Assignment. The district court retained jurisdiction to resolve these	6
questions. The district court also denied Defendant’s request for relief for alleged	7
fraud on behalf of HSBC or its counsel.	8
{7} 	HSBC moved for reconsideration. Without a hearing, the district court revised	9
its earlier ruling and entered a final order. The district court surveyed the law of New	10
Mexico and other jurisdictions and found that as a general rule: (1) a transfer of a	11
mortgage without the transfer of the corresponding note is a nullity, and (2) without	12
a showing that a party in the chain of title intended to separate the note from the	13
mortgage, the mere existence of an unrecorded document purporting to show a	14
transfer of the mortgage is insufficient to defeat standing to foreclose. Applying	15
these general rules to the case at bar, the district court granted HSBC complete	16
summary judgment as to both the Note and the Mortgage. Defendant appeals.	17

4
DISCUSSION	1
Standard of Review	2
{8} 	We review the district court’s grant of summary judgment de novo. Encinias	3
v. Whitener Law Firm, P.A., 2013-NMSC-045, ¶ 6, 310 P.3d 611. “On appeal from	4
the grant of summary judgment, we ordinarily review the whole record in the light	5
most favorable to the party opposing summary judgment to determine if there is any	6
evidence that places a genuine issue of material fact in dispute.” City of Albuquerque	7
v. BPLW Architects & Eng’rs, Inc., 2009-NMCA-081, ¶ 7, 146 N.M. 717, 213 P.3d	8
1146. “Summary judgment is appropriate where there are no genuine issues of	9
material fact and the movant is entitled to judgment as a matter of law.” Self v. United	10
Parcel Serv., Inc., 1998-NMSC-046, ¶ 6, 126 N.M. 396, 970 P.2d 582.	11
Standing to Enforce the Note	12
{9} 	New Mexico’s modern foreclosure standing rules were first set forth in Bank	13
of New York v. Romero, 2014-NMSC-007, 320 P.3d 1. Romero established that	14
“[s]tanding is to be determined as of the commencement of [the] suit.” Id. ¶ 17	15
(internal quotation marks and citation omitted). As such, a foreclosing party “must	16
demonstrate that it had the right to enforce the note and the right to foreclose the	17
mortgage at the time the foreclosure suit was filed.” PNC Mortg. v. Romero, 2016-	18
NMCA-064, ¶ 19, 377 P.3d 461, 467 (internal quotation marks and citation omitted);	19
see Romero, 2014-NMSC-007, ¶ 17 (“One who holds a note secured by a mortgage	20

5
has two separate and independent remedies, which he may pursue successively or	1
concurrently; one is on the note against the person and property of the debtor, and	2
the other is by foreclosure to enforce the mortgage lien upon his real estate.” (internal	3
quotation marks and citation omitted)); id. ¶ 35 (recognizing “the separate functions	4
that note and mortgage contracts perform in foreclosure actions[,]” where “the note	5
is the loan and the mortgage is a pledged security for that loan”). With respect to the	6
promissory note, the foreclosing party must demonstrate that, at the time it filed suit,	7
it “either (1) had physical possession of the . . . note indorsed to it or indorsed in	8
blank or (2) received the note with the right to enforcement, as required by the UCC.”	9
Romero, 2014-NMSC-007, ¶ 19.	10
{10} 	“[T]he holder of a note indorsed in blank may, as a general matter, enforce	11
the note.” Deutsche Bank Nat’l Tr. Co. v. Johnston, 2016-NMSC-013, ¶ 25, 369 P.3d	12
1046 (citing NMSA 1978, §§ 55-3-205(b), -301 (1992)); see Romero, 2014-NMSC-	13
007, ¶ 26 (“[The] blank indorsement . . . established the [b]ank as a holder because	14
the [b]ank [was] in possession of bearer paper[.]”). In this case, HSBC attached a	15
copy of the Note indorsed in blank to its complaint. HSBC therefore established a	16
prima facie case of standing to enforce the Note.	17
Right to Foreclose the Mortgage	18
{11} 	The only disputed issue here is whether HSBC has a right to foreclose the	19
Mortgage. As described above, Defendant found an Unrecorded Assignment of his	20

6
Mortgage in HSBC’s counsel’s files that purports to assign the Mortgage from the	1
original lender, Wells Fargo, to U.S. Bank, N.A., as the trustee of a securitized trust.	2
It is notarized and dated January 19, 2007, the same day Defendant executed his	3
Note and Mortgage. There is no evidence the Unrecorded Assignment was ever	4
delivered to U.S. Bank, N.A., or that it was ever recorded. Defendant contends,	5
however, that the Unrecorded Assignment divests HSBC of standing to foreclose the	6
Mortgage, effectively leaving HSBC with the district court’s judgment on the Note	7
and no collateral upon which to foreclose.	8
The Mortgage Follows the Note	9
{12} 	The law in New Mexico has long been established: The mortgage follows the	10
note, allowing the subsequent holder of the note to enforce the mortgage even	11
without a formal assignment of the mortgage. In 1913, our Supreme Court held:	12
The transfer of a negotiable promissory note, by indorsement and	13
delivery merely, where indorsed in blank or payable to bearer, the	14
payment of which is secured by a mortgage or deed of trust, carries with	15
it, in equity, the mortgage or deed of trust securities. The indorsee of	16
the promissory note is entitled to the benefits of such mortgage, whether	17
an assignment of the same is made or not.	18
Medler v. Childers, 1913-NMSC-015, ¶ 9, 17 N.M. 530, 131 P. 490 (internal	19
quotation marks and citation omitted); see also Simson v. Bilderbeck, Inc., 1966-	20
NMSC-170, ¶ 13, 76 N.M. 667, 417 P.2d 803 (“It has frequently been held that a	21
mortgage is but an incident to the debt, the payment of which it secures, and its	22
ownership follows the assignment of the debt.” (internal quotation marks and	23

7
citation omitted)); Hayden v. Speakman, 1914-NMSC-077, ¶ 11, 20 N.M. 513, 150	1
P. 292 (Abbott, J., rehearing) (holding that “the bona fide holder of negotiable paper,	2
transferred to him by indorsement thereon before maturity, and secured by a real	3
estate mortgage, need not record the assignment of the mortgage”); Stearns-Roger	4
Mfg. Co. v. Aztec Gold Min. & Mill Co., 1908-NMSC-001, ¶ 33, 14 N.M. 300, 93 P.	5
706 (“[A mortgage] is a mere incident to the debt which it secures, upon which it	6
depends, and which it follows and will pass with an assignment of the debt to the	7
holder.”).	8
{13} 	We can find no indication that New Mexico regards this principle as archaic,	9
disused, or otherwise in question. To the contrary, both the legislative and judicial	10
branches of our state government have reaffirmed the principle. Our Legislature, in	11
2005, codified the principle: “The attachment of a security interest in a right to	12
payment or performance secured by a security interest or other lien on personal or	13
real property is also attachment of a security interest in the security interest,	14
mortgage or other lien.” NMSA 1978, § 55-9-203(g) (2005). And our Supreme Court	15
has repeatedly cited this principle favorably in its opinions clarifying New Mexico’s	16
modern foreclosure standing requirements. See Romero, 2014-NMSC-007, ¶ 35	17
(citing 55 Am. Jur. 2d Mortgages § 584 (2009) (“A mortgage securing the repayment	18
of a promissory note follows the note, and thus, only the rightful owner of the note	19

8
has the right to enforce the mortgage.”). We decline Defendant’s invitation to	1
reconsider the long-standing principle that “the mortgage follows the note.”	2
{14} 	In this case, the district court found HSBC made a prima facie case of its	3
entitlement to foreclose the Mortgage. HSBC established that it was in possession	4
of the Note at the time of filing by presenting the original Note indorsed in blank	5
with its complaint. Under New Mexico law, then, when the Note indorsed in blank	6
was transferred to HSBC prior to filing, the Mortgage followed the Note into	7
HSBC’s possession. See Medler, 1913-NMSC-015, ¶ 9; see also § 55-9-203(g);	8
Romero, 2014-NMSC-007, ¶ 35; BAC Home Loans Servicing LP v. Smith, 2016-	9
NMCA-025, ¶ 8, 366 P.3d 714 (“Because the right to enforce the mortgage arises	10
from the right to enforce the note, the question of standing turns on whether the	11
plaintiff has established timely ownership of the note.”). An Assignment transferring	12
the Mortgage from original lender Wells Fargo to HSBC was also recorded in Santa	13
Fe County on June 13, 2012, and attached to HSBC’s complaint. Therefore, there	14
would be no question that HSBC established a prima facie showing of its right to	15
foreclose the Mortgage, but for the issue of the Unrecorded Assignment, which	16
predates on its face the Assignment to HSBC attached to its complaint. We thus turn	17
to the effect, if any, of the Unrecorded Assignment.	18

9
The Unrecorded Assignment	1
{15} 	Defendant argues the Unrecorded Assignment creates a question of fact as to	2
whether the Assignment to HSBC was valid and thus, whether HSBC has the right	3
to enforce the mortgage. Defendant contends that the Unrecorded Assignment	4
previously assigned the mortgage rights to another entity, and therefore, the later-	5
dated Assignment to HSBC is of no effect. Having examined the law of New	6
Mexico, that of other jurisdictions, and the secondary sources, we disagree. The	7
Unrecorded Assignment is, as a matter of law, a legal nullity.	8
{16} 	No New Mexico case directly addresses Defendant’s argument. However, we	9
find strong support in the law of other jurisdictions and in the Restatement (Third)	10
of Property (Mortgages) for the proposition that, absent evidence of a contrary intent	11
by the parties to an assignment, the attempted assignment of a mortgage without a	12
corresponding transfer of the note is a legal nullity. See Deutsche Bank Nat’l Tr. Co.	13
v. Spanos, 961 N.Y.S.2d 200, 202-03 (N.Y. App. Div. 2013) (stating that the general	14
rule is that “an assignment of a mortgage without assignment of the underlying note	15
or bond is a nullity”); see also Bellistri v. Ocwen Loan Servicing, LLC, 284 S.W.3d	16
619, 623 (Mo. Ct. App. 2009) (“When the holder of the promissory note assigns or	17
transfers the note, the deed of trust is also transferred. An assignment of the deed of	18
trust separate from the note has no force. Effectively, the note and the deed of trust	19
are inseparable, and when the promissory note is transferred, it vests in the transferee	20

10
all the interest, rights, powers and security conferred by the deed of trust upon the	1
beneficiary therein and the payee in the notes.” (internal quotation marks and	2
citations omitted)); Montgomery Cty., Pa. v. MERSCORP, Inc., 16 F. Supp. 3d 542,	3
554-55 (E.D. Pa. 2014) (holding a note and its corresponding mortgage are	4
inseparable and the assignment or transfer of a note secured by a mortgage is, in	5
Pennsylvania, equivalent to an assignment of the mortgage as well), rev’d on other	6
grounds, 795 F.3d 372, 375 (3d Cir. 2015); In re Trierweiler, 484 B.R. 783, 789	7
(B.A.P. 10th Cir. 2012) (“[S]ince a mortgage is only an incident to the debt it	8
secures, a transfer of a note carries with it the mortgage security and operates as an	9
equitable assignment of the mortgage[.]”), aff’d 570 F. App’x 766 (10th Cir. 2014);	10
see also Christopher L. Peterson, Two Faces: Demystifying the Mortgage Electronic	11
Registration System’s Land Title Theory, 53 Wm. & Mary L. Rev. 111, 119 n.34	12
(2011) (compiling cases from many jurisdictions finding that the note and the	13
mortgage are inseparable and that the assignment of a mortgage alone is a nullity).	14
{17} 	The secondary sources are in accord. The Restatement (Third) of Property	15
(Mortgages) § 5.4 (1997) stands for the proposition that the assignment of a note	16
effectively assigns both the note and the mortgage, making the two documents	17
legally impossible to split as a general rule. See Restatement (Third) of Property	18
(Mortgages) § 5.4(a)-(b). The Restatement provides:	19
(a) A transfer of an obligation secured by a mortgage also transfers the	20
mortgage unless the parties to the transfer agree otherwise.	21

11
(b) Except as otherwise required by the Uniform Commercial Code, a	1
transfer of a mortgage also transfers the obligation the mortgage secures	2
unless the parties to the transfer agree otherwise.	3
(c) A mortgage may be enforced only by, or [on] behalf of, a person	4
who is entitled to enforce the obligation the mortgage secures.	5
Id.; see also Trierweiler, 484 B.R. at 789 (finding an exception to the general rule	6
that a mortgage transferred without the note is a nullity, for cases in which there is	7
clear evidence of an intent to bifurcate the note and mortgage).	8
{18} 	We read the language of the Restatement (Third) of Property (Mortgages)	9
§ 5.4 to be consistent with New Mexico’s modern foreclosure jurisprudence. See,	10
e.g., Romero, 2014-NMSC-007, ¶ 35 (favorably citing Baxter Dunaway, Law of	11
Distressed Real Estate, § 24:18 (2011) for the proposition that “[t]he mortgage only	12
secures the payment of the debt, has no life independent of the debt, and cannot be	13
separately transferred[, and that i]f the intent of the lender is to transfer only the	14
security interest (the mortgage), this cannot legally be done and the transfer of the	15
mortgage without the debt would be a nullity”). And, although New Mexico has not	16
yet formally adopted the Restatement (Third) of Property (Mortgages) approach,	17
both our Supreme Court and our Legislature have recently cited with approval	18
Restatement (Third) of Property (Mortgages) § 5.4 and the principles set forth	19
therein. See Johnston, 2016-NMSC-013, ¶ 30; see also § 55-9-203(g), cmts. We	20

12
therefore rely in part on the Restatement (Third) of Property (Mortgages) in support	1
of our conclusions in the instant case.	2
{19} 	We also find support for our conclusion in public policy. The Restatement	3
(Third) of Property (Mortgages) describes the underlying policy as follows:	4
[S]eparating the obligation from the mortgage results in a practical loss	5
of efficacy of the mortgage. When the right of enforcement of the note	6
and the mortgage are split, the note becomes, as a practical matter,	7
unsecured. 	This 	result 	is 	economically 	wasteful 	and 	confers 	an	8
unwarranted windfall on the mortgagor.	9
Restatement (Third) of Property (Mortgages) § 5.4 cmt. a (1997). The objective of	10
the rule “is to keep the obligation and the mortgage in the same hands unless the	11
parties wish to separate them. This result is sometimes justified on the ground that	12
‘[a]ll the authorities agree that the debt is the principal thing and the mortgage an	13
accessory[.]’ ” Id. cmt. b (quoting Carpenter v. Longan, 83 U.S. 271, 275 (1872))).1
14
{20} 	In this case, we apply the general rule and affirm the district court’s conclusion	15
that the Unrecorded Assignment is a legal nullity. We decline to disturb the district	16
court’s finding that there was no evidence of an intent by the parties to the	17
Unrecorded Assignment to bifurcate the Note and Mortgage and leave the Note	18
unsecured. Defendant does not identify any evidence of such an intent. See Corona	19
1 Though we also recognize those policy reasons supporting Romero, 2014-
NMSC-007, and its progeny for requiring foreclosing parties to demonstrate strict
standing requirements, we are persuaded in this case those requirements were met
by HSBC as the holder of the Note and Assignment prior to filing the instant
foreclosure action.

13
v. Corona, 2014-NMCA-071, ¶ 28, 329 P.3d 701 (“This Court has no duty to review	1
an argument that is not adequately developed.”). As such, we affirm the district	2
court’s finding that the Unrecorded Assignment has no legal effect on HSBC’s right	3
to foreclose the Mortgage.	4
Defendant’s Allegations of Fraud	5
{21} 	Defendant 	encourages 	us 	to 	draw 	inferences 	about 	the 	Unrecorded	6
Assignment from the circumstances of Defendant’s discovery of this document in	7
the files of HSBC’s counsel, which Defendant maintains constituted “a fraud on the	8
court.” In so arguing, Defendant discusses at some length the national conversation	9
around foreclosure fraud. His argument is essentially that the alleged conduct of	10
HSBC or its counsel must have been fraudulent because, like the financial entities	11
discussed in the academic literature cited in Defendant’s briefing, HSBC seeks in	12
this matter to enforce a note and foreclose a mortgage. Defendant has demonstrated	13
no factual nexus between the authority he cites and the instant case.	14
{22} 	As a general rule, averments of fraud require specificity. See Rule 1-009(B)	15
NMRA (“In all averments of fraud . . . the circumstances constituting fraud . . . shall	16
be stated with particularity.”). Defendant’s allegations of fraud on the part of HSBC	17
or its counsel were not brought to the court below with sufficient particularity, and	18
they accordingly found no purchase there. The district court found no fraudulent	19
conduct on the part of HSBC in connection with Defendant’s motion to compel the	20

14
production of the Unrecorded Assignment, and on appeal Defendant does not	1
challenge 	this 	finding 	except 	with 	unsupported 	innuendo 	concerning 	the	2
“[s]ubmission [by HSBC] of fraudulent [Assignments of Mortgage] in this case.”	3
These are not facts found below; they are unsupported assertions made on appeal.	4
{23} 	This Court cannot countenance broad insinuations of fraud unsupported by	5
competent evidence and briefed on appeal without a corresponding challenge to any	6
specific finding or ruling made below. “[A]n appellant is bound by the findings of	7
fact made below unless the appellant properly attacks the findings.” Martinez v. Sw.	8
Landfills, Inc., 1993-NMCA-020, ¶ 18, 115 N.M. 181, 848 P.2d 1108; see Seipert v.	9
Johnson, 2003-NMCA-119, ¶ 26, 134 N.M. 394, 77 P.3d 298 (“An unchallenged	10
finding of the trial court is binding on appeal.”). To the extent Defendant is asking	11
this Court to, sua sponte, sanction HSBC’s counsel for conduct the district court did	12
not find to be fraudulent, we decline to do so on the record before us.	13
{24} 	We conclude that Defendant failed in the district court to establish by	14
admissible evidence a genuine issue of material fact concerning the alleged conduct	15
of HSBC or its counsel sufficient to defeat HSBC’s motion for summary judgment	16
as to HSBC’s right to foreclose the Mortgage. Summary judgment was properly	17
granted.	18
CONCLUSION	19
{25} 	For the foregoing reasons, we affirm.	20

15
{26} 	IT IS SO ORDERED.	1
______________________________	2
MEGAN P. DUFFY, Judge	3
WE CONCUR:	4
_______________________________	5
J. MILES HANISEE, Chief Judge	6
_______________________________	7
ZACHARY A. IVES, Judge	8