N O T FO R PUB L ICAT IO N UNITED STATES C OUR T OF APPEALS FOR THE NINTH C IR C UIT

FR ANC ES R

Y AN, by and through he r Gua rdia n a d Lite m , Ge ra ldine R

y a n , Pla i ntiff-Appe lla

nt,
v. NATIONSTAR

M OR TGAGE, LLC , De fe nda n t-Appe l le e . No. 15-15442 D.C . No. 2:14-c v-02067-GEB -DAD
M EM O R ANDUM *

Appe a l from

the Unite d

Stat e s Distric t C ourt for the Ea ste rn Distric t of C a lifornia Garland E. B urre ll, Jr., Distric t Judge , Pre siding Argue d a nd Subm itte d Fe brua

ry 16, 2017 San Fran c isc o , C a lifornia B e fore : GOULD a

nd B E R ZON, C irc uit Judge s, a

nd GAR B IS, ** Distric t

Judge
. Appe lla nt Fra n c e s R y an, through he r gua

rdia n a d lite m Ge ra l dine R

y an,
a ppe a ls the distric t c ourt’ s dism issa l of he r de c la ra tory judgm e nt a c tion a g a inst 

# F IL ED
J UN 30 2017 M OLLY C. DW Y E R, CLERK U. S. CO URT O F APPEALS

* This disposition is not a ppropria te for public at ion a

nd is not pre c e de nt e xc e pt a s provide d

by Ninth C irc uit R

ule 36-3.

* * The Honora

ble M arvin J. Ga

rbis, Unite d State s Distric t Judge for the Distric t of M ary la

nd, sitting by

de s igna tion.Appe l le e Nationsta r M ortga ge , LLC (“N ationsta r” ), the loa

n se rvic e r for a $500,000 note

se c ure d by a de e d of trust (“ DOT” ) on R y an’ s hom e . W e a ffirm
. Unde r C a lifornia

la w, a borrowe r c a

nnot bring a

n a c tion c h a lle nging the
a ssignm e nt of a

loa n or DOT from

one le nde r or loa

n-se rvic e r to a

nothe r unle ss that a ssignm e nt wa s void a b initio
. Se e Turne r v . W e lls Fargo Bank

N .A. , No. 15- 60046, 2017 W

L 2587981 a

t *3 (9th C ir. June 15, 2017) (c iting Yv anov a v . N e w C e ntury M ortg. C o r p. , 62 C a l. 4th 919, 935 (2016)). R y an a lle ge d tha

t the August 2011 a ssignm e n t of the DOT on he r hom e to a se c uritiz e d trust (“ Trust” ) wa s void unde r the Ne w York la

w be c a use it viola

te d provisions of the Inte rna l R e ve nue C ode tha t gove rn the Trust’ s tax-pre fe rre d sta tus a s a R e a l Esta

te M o rtga ge Inve stm e nt C onduit (“ R EM IC ” ). Se e 26 U.S.C . §§ 860A–860G; N.Y. Est. Powe rs & Trusts La

w (“ EPTL” ) § 7–2.4 (M c Kinne y ). 1. C iting Glask

i v . Bank of Ame ric a, N

. A. , 218 C a l. App. 4th 1079, 1097 (2013), R y a n first c onte nds tha

t the late a s signm e nt of the DOT wa s void ab initio be c a use it c ontra

ve ne d the Trust’ s c e ntra l purpose , na m e ly , its ta

x-fav ore d REM IC sta tus. 1 This c o urt ha s e m

pha siz e d tha

t “ the we ight of Ne w York a uthority is
c ontra ry to pla intiffs’ c onte ntion tha t a ny fa ilure to c om

p ly with thete rm s of the

1 R y an doe s not a lle ge whe re this purpose is de fine d, but be c a

use the Trust is an e xpre s s trust, wea ssum e the purpose is inc lude d in, or othe rwise e m a n ate s from , the Trust’ s gove rning doc um e nt. Se e ge ne rally , e .g. , Mohonk

Tr. v . Bd. of Asse ssors , 392 N.E.2d 876 (N.Y. 1979). 2[trust’ s gove rning doc um e nt] re nde re d the de fe n da nts’ a c quisition of pla

i ntiffs’ loa n s a nd m ortga ge s void a s a m a tte r of [Ne w York] trust la w.” Turne r , 2017 W L 2587981 a

t *3 (a lte ra tion omitte d) (quoting Sate rbak v . J PMorgan C

h aseBank

, N .A. , 245 C a l. App. 4th 808, 815 (2016), a nd Rajamin v . De utsc he Bank N at’l Tr. C o. , 757 F.3d 79, 88–89 (2d C ir. 2014); se e also W e lls Fargo Bank

, N

. A. v

. Erobobo , 9 N.Y.S.3d 312, 314 (App. Div. 2015)). R y an points to no Ne

wYork c a se la

w to distinguish he

r purpose argum e nt from the ge ne ra l Ne w York rule pre dic te d by the Se c ond C irc uit in Rajamin and
a dopte d by

this c ourt in Turne r . She inste a d insists tha t Rajamin “ fa ile d to a c c ount for num e rous Ne w York de c isions tha t c onstrue d [EPTL] § 7–2.4 litera lly .” Although Turne r did not e xplic itly disc uss EPTL § 7–2.4, it m a de c le a r tha t Ne w York c ourts ha

ve re je c t e d “ G lask

i ’ s inte rpre tation of Ne w York la w” and the lite ra l
re a d ing of the Ne wYork sta tute tha t R y an propose s he re . Turne r , 2017 W L 2587981 a

t *3; se e also Glask

i , 218 C a l. App. 4th a

t 1096–97 (re ly ing sole l y

on a

“ lite ra l inte rpre tation” of EPTL § 7–2.4, a s give n in W e lls Fargo Bank

, N .A. v

. Erobobo , 39 M isc
. 3d 1220(A) a t *8 (N.Y. Sup. C t. Apr. 29, 2013), re v ’d , 9 N.Y.S.3d 312, 314 (App. Div. 2015)). Thus, a s sum ing, without de c iding, tha t the truste e ’ s a c c e pta

n c e of the late -a ssigne d DOT on R y a n ’ s hom e c ontra

ve ne d the

3Trust’ s ove ra ll purpose , tha t a ssignm e nt wa s ne ve rthe le ss voida ble by the Trust’ s be ne fic ia rie s but not void a b initio unde r Ne wYork la w . 2. R y an a dditiona lly

m a inta ins tha

t the late a s signm e nt of he r DOT to the Trust wa s void be c a

use it c ontra

ve ne d the fe de ra l taxc ode . B e c a use he r a rgum e nt is ba se d on the a lle ge d ille ga lity of a truste e ’ s a c t unde r gove rning la w de fine d outside the te rm s of the Trust, R y an a sse rts, it is not fore c lose d by the holdings in Turne r , 2017 W L 2587981 a t *2–3, or Rajamin , 757 F.3d a t 87, whic h

both
c onc lude d tha

t a ssignm e nts m a de in c ontra ve ntion of te rm s c onta ine d w ithin a trust’ s gove rning doc um e n t we re not void ab initio unde r Ne w York la w. W e
a ssum e , without de c i ding, tha t R y an’ s a rgum e n t is distinc t a

nd tha t, a s R y an
m a inta ins, Ne w York la

w doe s not a llow be n e fic ia rie s to ra tify a truste e ’ s a c ts in viola tion of positive

la w or public polic y , se e Moss v . C ohe n , 53 N.E. 8, 10 (N.Y. 1899). So a ssum ing, R

y an none the le ss fa ils to sta

te a pla usible c la i m

for re lie f. Se e Fe d. R . C iv. P. 12(b)(6). The Inte rna l R e ve nue C ode ne ithe r m ake s the late a ssignm e nt of the DOT to the T rust ille ga l nor re nde rs it void. R at he r, the re c e i pt of inc om e from the late transfe rre d a sse t m ay

be a “ p rohibite d tra

n sa c tion” subje c t to a

100% ta x pe na lty
. 26 U.S.C . § 860F(a ). If the late tra nsfe r of the DOT unne c e ssa rily e xpose d the
a sse t to a 100% ta x pe na l ty on inc om e ge ne ra te d from the a sse t, the truste e m ight 4be lia

ble to the Trust’ s be ne fic i arie s for wa sting or mism ana ging theTrust’ s prope rty
. Se e In reHubbe ll’s W ill , 97 N.E.2d 888, 892 (N.Y. 1951). But be c a use
suc h wa ste or m ism ana ge m e nt a ffe c ts only the Trust be n e fic ia

rie s and doe s not dire c tly c ontra ve ne any positivela

w or offe nd public polic y , the late a s signm e nt of the D OT wa s not void ab initio ba se d on the a pplic ation of the R EM IC provisions. Se e Moss , 53 N.E. a

t 10. Simila

rly , e ve n if the tra

nsa c tion le d to a

c om ple t e loss of the T rust’ s tax-favore d REM IC sta tus, 2 tha t loss would be

inc urre d by

the be ne fic ia rie s of the Trust, not the

public at la

rge , a nd so doe s not offe n d public polic y . 3 AFFIRM E D.

2 C ontra ry to he r a sse rtion, R

y an ’ s a lle gations, ta

ke n a s true , fa il to e sta

blish that the tra nsa c tion would ha

ve tha t e ffe c t. Although substa ntia l ly a l l the a sse ts he ld by a REM IC m

ust be qua lifie d

m o rtga ge s or othe r pe rm itte d a s se ts, s e e 26 U.S.C . §§ 860D(a)(4), 860G(d), a trust m ay re ta in R E M IC sta tus e ve n if it holds som e non-pe rm itte d a sse ts, a s long a s those a s se ts do not e xc e e d a de m inim is am ount. 26 C .F.R . § 1.860D–1(b)(3). Additiona lly , e ve n if a

trust ha s m ore tha

n a de m inim is a

m ount of non-pe rm itte d a sse ts, the IR S will c ontinue to tre at the trust a s a R EM IC if the trust ta k e s c e rta in pre s c ribe d

ste p s to re m e dy

the ina dve rte nt loss of its R

EM IC qua lific a tions. 26 U.S.C . § 860D(b)(2). 3 R y an brie fly

a sse rts, for the first tim e in he r re ply brie f, tha t the Trust ha s c om m itte d tax fra

ud sinc e its inc e ption. Although suc h a n a rgum e nt m ight im plic a t e public polic y , we de c line to re vie w R y an’ s a rgum e nt, be c a

use “ argum e nts not ra ise d by

a pa rty in its open ing brie f are de e m e d wa ive d,” Smith v

. Marsh , 194 F.3d 1045, 1052 (9th C ir. 1999), a nd none of the e xc e ptions to tha t ge ne ra l rule a

pply he re . Se e K

oe rne r v . Grigas , 328 F.3d 1039, 1048–49 (9th C ir. 2003). 5