Ryan Ex Rel. Ryan v. Nationstar Mortgage, LLC
701 F. App'x 585
| 9th Cir. | 2017Background
- Frances Ryan challenged Nationstar Mortgage’s authority to enforce a deed of trust (DOT) after an August 2011 assignment of her loan into a securitized trust (the Trust).
- Ryan alleged the assignment was void ab initio under New York law because it violated the Trust’s purpose and federal REMIC tax rules (26 U.S.C. §§ 860A–860G), threatening the Trust’s tax-favored status.
- The district court dismissed Ryan’s declaratory-judgment action; she appealed through her guardian ad litem.
- The Ninth Circuit assumed, without deciding, that the late assignment contravened the Trust’s purpose and could implicate REMIC penalties but asked whether such defects render the assignment void ab initio.
- The court treated New York trust law and precedent as controlling on whether improper assignments are void or merely voidable by beneficiaries and examined whether the tax code or public policy would make the assignment void as a matter of law.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether an assignment that undermines a trust’s central purpose (e.g., REMIC status) is void ab initio under New York law | Ryan: The late assignment violated the Trust’s central (tax) purpose and is void ab initio | Nationstar: New York authority treats such defects as voidable by beneficiaries, not void ab initio | Court: Assignment is voidable, not void ab initio; Ryan cites no controlling NY authority to the contrary |
| Whether violation of the federal REMIC rules makes the assignment illegal and void ab initio | Ryan: The assignment violated the Internal Revenue Code, so it is illegal and void | Nationstar: REMIC penalties affect tax treatment and beneficiaries, but do not make the assignment void as a matter of law | Court: REMIC rules may create tax penalties or beneficiary claims for waste, but do not render the assignment void ab initio |
| Whether a trustee’s act violating positive law/public policy (tax law) is non-ratifiable and thus void | Ryan: NY law does not permit ratification of acts contravening positive law; thus the assignment should be void | Nationstar: Even assuming non-ratifiability, the alleged harms are to beneficiaries, not the public, so no public-policy bar | Court: Even assuming the distinction, Ryan’s allegations don’t plausibly show illegality that offends public policy or positive law to void the assignment |
| Whether loss of REMIC status (or tax fraud claim) would create public-policy grounds to void the assignment | Ryan: Loss of REMIC status or alleged tax fraud implicates public policy and voids assignment | Nationstar: Any tax consequences fall on beneficiaries; alleged tax fraud was raised too late and is waived | Court: Loss of REMIC status would affect beneficiaries, not public policy; tax-fraud claim waived on appeal |
Key Cases Cited
- Yvanova v. New Century Mortg. Corp., 62 Cal. 4th 919 (Cal. 2016) (borrower’s challenge to assignment limited unless assignment void ab initio)
- Rajamin v. Deutsche Bank Nat’l Tr. Co., 757 F.3d 79 (2d Cir. 2014) (New York law predicts assignments violating trust documents are voidable, not void)
- Saterbak v. JPMorgan Chase Bank, N.A., 245 Cal. App. 4th 808 (Cal. Ct. App. 2016) (rejects Glaski’s reading; defects in trust documents make transfers voidable)
- Glaski v. Bank of America, N.A., 218 Cal. App. 4th 1079 (Cal. Ct. App. 2013) (held literal reading of NY statute could render assignments void ab initio)
- Moss v. Cohen, 53 N.E. 8 (N.Y. 1899) (acts violating positive law/public policy may be non-ratifiable)
- In re Hubbell’s Will, 97 N.E.2d 888 (N.Y. 1951) (trustee liability for wasting or mismanaging trust property)