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Volt Asset Holdings Trust XVI. v. Martinez

United States District Court, D. New Mexico

March 1, 2017

VOLT ASSET HOLDINGS TRUST XVI, Plaintiff,
v.
MARIE A. MARTINEZ a/k/a MARIE MARTINEZ, FELIX J. MARTINEZ a/k/a FELIX JOE MARTINEZ PUBLIC TRUST, and SOUTHWEST FINANCIAL SERVICES, INC., Defendants.

          MEMORANDUM OPINION AND ORDER

         This matter comes before the Court upon Plaintiff Volt Asset Holdings Trust XVI's (Volt) Motion for Summary Judgment, Default Judgment, and for Order for Foreclosure Sale (Motion), filed July 29, 2015. (Doc. 118). Volt seeks a default judgment against Defendants Felix Joe Martinez Public Trust and Southwest Financial Services, Inc., summary judgment against pro se Defendants Marie and Felix Martinez (the Martinezes), and a judgment and order of foreclosure on the Martinezes' Mortgage, including the appointment of a special master and an award of reasonable attorneys' fees and costs. The Martinezes filed a response on August 17, 2015, in which they (1) move to strike Melinda Girardeau's Affidavit and Verification, and her Affidavit Regarding Notice of Right to Cure Default, including the attachments to those affidavits, (2) move to dismiss the claims against Defendants Marie Martinez and Felix Joe Martinez Public Trust for lack of personal jurisdiction, and (3) oppose the motion for summary judgment. (Doc. 121). Volt filed an amended reply on November 1, 2016. (Doc. 139).

         Having considered the Motion, the accompanying briefs, and the relevant law and evidence, the Court (1) denies the Martinezes' request to strike Girardeau's affidavits, (2) denies the Martinezes' request to dismiss the claims against Defendants Marie Martinez and Felix Joe Martinez Public Trust for lack of personal jurisdiction, (3) denies Volt's request for an entry of default judgment against Defendants Felix Joe Martinez Public Trust and Southwest Financial Services, Inc., (4) grants summary judgment against the Martinezes, (5) defers entering an order of foreclosure, including the appointment of a special master, until the Court determines the interests of Defendants Felix Joe Martinez Public Trust and Southwest Financial Services, Inc. in the subject property, and (6) defers ruling on Volt's request for reasonable attorneys' fees and costs.

         A. Background

         1. The Complaint for Foreclosure (Complaint)

         This is a lawsuit to foreclose a mortgage on a Chimayo, New Mexico property apparently refinanced by the Martinezes. On September 13, 2006, Oak Street Mortgage loaned the Martinezes $270, 000.00. (Doc. 1-1) at 8-10. The Note, attached to the Complaint, contains an undated special indorsement from Oak Street Mortgage payable to the order of Oak Street Mortgage LLC. Id. at 10. The Note also contains an undated blank indorsement from Oak Street Mortgage LLC which states “pay to the order of.” Id. Donna J. Parker signed both indorsements as an authorized signer for Oak Street Mortgage and Oak Street Mortgage LLC. Id.

         Oak Street Mortgage secured the Note with a Mortgage on the Chimayo property. Id. at 11-26. The Mortgage, attached to the Complaint, names Mortgage Electronic Registration Systems, Inc. (MERS) as a nominee for Oak Street Mortgage and for Oak Street Mortgage's “successors, and assigns.” Id. at 11. The Mortgage was recorded with the Rio Arriba County Clerk on September 18, 2006. Id.

         On June 1, 2012, MERS, as nominee for Oak Street Mortgage and its successors and assigns, assigned the Mortgage to HSBC Mortgage Services, Inc. (HSBC). Id. at 27. This assignment, which is attached to the Complaint, was recorded with the Rio Arriba County Clerk on June 4, 2012. Id.

         On March 19, 2013, HSBC filed the Complaint to foreclose on the Mortgage in state court. HSBC brought the Complaint against the (1) Martinezes for defaulting on the Note, and (2) Felix Joe Martinez Public Trust and Southwest Financial Services, Inc., because they may claim an interest in the Chimayo property. (Doc. 1-1) at 4-5, ¶¶ 14-15. HSBC alleges that it was in possession of both the Note and the Mortgage at the time it filed the Complaint. Id. at 2, ¶ 8. On May 31, 2013, the Martinezes removed the state foreclosure action to this Court. (Doc. 1).

         2. Post-Removal Actions

         On January 14, 2014, HSBC assigned the Mortgage to Volt. (Doc.118-1). The Court, subsequently, held that HSBC had standing to bring this lawsuit and ordered that Volt be substituted for HSBC as HSBC's successor in interest. (Docs. 97 and 100). The Court further held that “once [HSBC] physically transferred the Note to Volt, it became holder of the Note with the right enforce both the Note and the Mortgage.” (Doc. 100) at 6. Consequently, the Court concluded that “Volt has standing to proceed as Plaintiff.” Id.

         B. Evidence Provided in Conjunction with the Motion

         1. Girardeau's Affidavit and Verification

         Girardeau is a duly appointed representative of Caliber Home Loans, Inc. (Caliber), Volt's mortgage servicer. (Doc. 118-1) at 1, ¶ 1. Girardeau's affidavit is based on her familiarity with the Note and knowledge of the “original books and records maintained” in Caliber's office. Id. The “books and records include data compilations of the [mortgage] payments … and are kept in the course of a regularly conducted business activity by Caliber Home Loans, Inc.” Id. at 2-3, ¶ 1. Girardeau attests that it is Caliber's regular practice to make payment entries “at or near the time each payment is received or amounts are paid by persons with knowledge of the information being recorded.” Id. at 2, ¶ 1. Because “[t]he original books of entry are contained in a computer database, which is voluminous when printed out and presented in its original form, ” Girardeau summarized those records. Id.

         Girardeau also attests that the following documents attached to her Affidavit and Verification are “true and correct copies of the loan documents:” the Note (identical to the Note attached to the Complaint), the Mortgage (identical to the Mortgage attached to the Complaint), the assignment of the Mortgage from MERS to HSBC (identical to the assignment attached to the Complaint), the assignment of the Mortgage from HSBC to Volt, and the payoff amounts through July 21, 2015. Id. at 2-3, ¶ 2.

         The Martinezes seek to strike this affidavit's attachments as impermissible hearsay.[1] The Federal Rules of Evidence, however, provide an exception to the rule against hearsay for business records. Federal Rule of Evidence 803(6) states that records of actions are admissible if a “custodian or another qualified witness” testifies that a

(A) the record was made at or near the time by-or from information transmitted by- someone with knowledge;
(B) the record was kept in the course of a regularly conducted activity of a business …;
(C) making the record was a regular practice of that activity…. and the party opposing the admission of the record “does not show that the source of information or the method or circumstances of preparation indicate a lack of trustworthiness.”

         As described above, Girardeau, as Caliber's representative, attests that she is familiar with the loan at issue and has knowledge of the books and records maintained by Caliber including data compilations created from payment entries made at or near the time payments were received. The Court, therefore, finds that Girardeau is a custodian or qualified witness under Rule 803(6). Additionally, Girardeau attests that it is Caliber's regular practice to keep these records of payments in the course of its regularly conducted business. These attestations comply with the business records exception to the hearsay rule.

         Nonetheless, the Martinezes dispute the trustworthiness of Girardeau's Affidavit and Verification. To demonstrate that lack of trustworthiness, the Martinezes produced a copy of the Note purportedly sent by Caliber to the Martinezes in November 2013, after HSBC filed the Complaint in March 2013 and after Caliber began servicing the loan in June 2013. (Doc. 36-2) at 2-7. This copy of the Note, unlike the copy of the Note attached to the Complaint and to Girardeau's Affidavit and Verification, has a bar code at the bottom of the first page and does not show the indorsements. Volt argues that the Court should disregard the November 2013 copy of the Note on the basis of hearsay and lack of authentication.

         Although the Note produced in November 2013 contains statements not made at a trial or hearing, the Martinezes do not offer it “to prove the truth of the matter asserted in” that Note. Rather, the Martinezes offer the copy of the Note produced in November 2013 to show that it is different from the one Girardeau produced and, thus, demonstrates the untrustworthiness of Girardeau's Affidavit and Verification. (Doc. 121-5) at 2, ¶ 3. Hence, the copy of the Note produced in November 2013 is not hearsay. See Rule 801(c).

         Even so, under Fed.R.Evid. 901(a), the proponent of a document must authenticate it by producing “evidence sufficient to support a finding that the item is what the proponent claims it is.” To determine whether a proponent has authenticated a document, the Court “must ascertain whether there is a reasonable probability that the evidence has not been altered in any material aspect ….” United States v. Brewer, 630 F.2d 795, 802 (10th Cir. 1980). Here, the copy of the Note attached to the Complaint in March 2013 preceded the November 2013 production of the Note, and Girardeau attests and swears that the copy of the Note she produced, the exact same copy as that attached to the Complaint, is true and correct. In light of this time line and Girardeau's attestations, there is a reasonable probability the Note produced in November 2013 was materially altered, i.e., the indorsements were omitted and a bar code was added. The Court, therefore, does not accept the copy of the Note produced in November 2013 as authentic and will not consider it.

         In sum, the Martinezes have not convinced the Court that Girardeau, in making her attestations regarding the authenticity of the loan documents, is somehow untrustworthy. Consequently, the loan documents attached to Girardeau's Affidavit and Verification are admissible under the business records exception to the hearsay rule. The Court will, therefore, not strike Girardeau's Affidavit and Verification and the attached loan documents.

         2. The Note

         The Note states that, in return for a loan, the Borrower, the Martinezes, promises to pay the Lender, Oak Street Mortgage, $270, 000.00, plus interest. (Doc. 118-3) at 4. In addition, the Note states that the Lender may transfer the Note. Id. “The Lender or anyone who takes this Note by transfer” is the “Note Holder.” Id.

         The Note further indicates that the interest is 9.450% per year and that this interest rate applies “both before and after any default….” Id. Monthly payments are $2, 260.46 per month until the maturity date in 2036. Id. The Note also provides for late charges for overdue payments. Id. at 5. If the Borrower does “not pay the full amount of each monthly payment on the date it is due, ” the Borrower is in default. Id.

         The Note Holder may also send a defaulting Borrower written notice that, if the Borrower does not pay the overdue amount by a certain date, the Note Holder can require immediate payment of the unpaid principal and interest. Id. In that situation, the Note Holder has the right to be paid back “all of its costs and expenses in enforcing [the] Note to the extent not prohibited by applicable law.” Id. Those expenses include “reasonable attorneys' fees.” Id. The Note further states that a mortgage, dated the same date as the Note, protects the Note Holder from losses which might result if the Borrower does not adhere to the terms of the Note. Id. The Note also shows a special indoresement from Oak Street Mortgage to Oak Street Mortgage LLC and a blank indorsement from Oak Street Mortgage LLC. Id. at 6. The Martinezes do not dispute that they signed the Note. Id.

         3. The Mortgage

         The Mortgage, as a security instrument, secures to the Lender, Oak Street Mortgage, repayment of the Note and the Borrower's, the Martinezes, performance of the Note and Mortgage. (Doc. 1-1) at 13. To do this, the Borrower mortgaged, granted, and conveyed the Chimayo property to “MERS (solely as nominee for Lender and Lender's successors and assigns) and to the successors and assigns of MERS….” Id. The Borrower agreed, pursuant to the Mortgage, to maintain the property. Id. at 17. In addition, the Borrower's obligations and liability are joint and several. Id. at 20.

         Should the Borrower fail to perform as agreed in the Mortgage, the “Lender may do and pay for whatever is reasonable or appropriate to protect Lenders' interest in the Property and rights under” the Mortgage, including, inter alia, “assessing the value of the Property, ” “appearing in court, ” and “paying reasonable attorneys' fees.” Id. at 18. “Any amounts disbursed by Lender” to protect its interest in the property and rights under the Mortgage “shall become additional debt of” the Borrower secured by the Mortgage. Id. “These amounts shall bear interest at the Note rate from the date of disbursement and shall be payable, with such interest, upon notice from Lender to Borrower requesting payment.” Id.

         Should the Borrower default on the Note,

Lender may charge Borrower fees for services performed in connection with Borrower's default, for the purpose of protecting Lenders' interest in the Property and rights under this [Mortgage], including, but not limited to, attorneys' fees, property inspection and valuation fees. In regard to any other fees, the absence of express authority in this [Mortgage] to charge a specific fee to Borrower shall not be construed as a prohibition on the charging of such fee. Lender may not charge fees that are expressly prohibited by this [Mortgage] or by Applicable Law.

Id. at 21. Upon default, the Lender can accelerate payment of the Note provided the Lender gives the Borrower notice (1) of the default, (2) of what can be done to cure the default, (3) of a date (more than 30 days from the date of the notice) to cure the default, and (4) that failure to cure the default by the specified date may result in acceleration of payment of the Note, foreclosure, and sale of the property. Id. at 23. If the default is not cured by the specified date, the Lender may require immediate payment of the Note in full “without further demand and may foreclose” the Mortgage “by judicial proceeding.” Id. In that event, Lender is “entitled to collect all expenses incurred in pursing the remedies provided in [the Mortgage], including, but not limited to, reasonable attorneys' fees and costs of title evidence.” Id.

         The Borrower has the right to discontinue the enforcement of the Mortgage by paying the Lender all sums owed including “expenses incurred in enforcing [the Mortgage], including, but not limited to, reasonable attorneys' fees, property inspection and valuation fees, and other fees incurred for the purpose of protecting Lender's interest in the Property and rights under [the Mortgage]….” Id. at 22. The Lender may require the Borrower to pay those sums and expenses with certified funds instead of with cash. Id.

         The Mortgage further states that the Note and Mortgage “can be sold one or more times without prior notice to Borrower” and might result in a change in the servicer, the entity that collects the payments due under the Mortgage and performs other mortgage loan servicing obligations. Id. at 22.

         The Martinezes duly signed the Mortgage and the Mortgage was recorded with the Rio Arriba County Clerk. Id. at 24-25.

         4. The Assignment of the Mortgage from MERS, as Nominee for Oak Street Mortgage and its Successors and Assigns, to HSBC

         In June 2012, MERS, as nominee for Oak Street Mortgage and its successors and assigns, transferred the Mortgage to HSBC. (Doc. 1-1) at 27. This assignment was recorded with the Rio Arriba County Clerk. Id.

         5. The Assignment of the Mortgage ...


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