Kanchana Karunaratne v. U.S. Bank

• Court: Court of Appeals for the Ninth Circuit
• Decided: April 13, 2018
• Docket: 16-56803
• Status: Unpublished

Opinion

NOT FOR PUBLICATION FILED UNITED STATES COURT OF APPEALS APR 13 2018 MOLLY C. DWYER, CLERK U.S. COURT OF APPEALS FOR THE NINTH CIRCUIT

KANCHANA KARUNARATNE, an No. 16-56803 individual and CARLA KARUNARATNE, an individual, D.C. No. 3:16-cv-00843-JLS-KSC Plaintiffs-Appellants,

v. MEMORANDUM*

U.S. BANK, as trustee, successor in interest to Wachovia Bank, National Association as trustee for Merrill Lynch Mortgage Investors Trust, Mortgage Loan Asset-Backed Certificates, Series 2005-A6 (erroneously sued as U.S. Bank, National Association); OCWEN LOAN SERVICING, LLC; MORTGAGE ELECTRONIC REGISTRATION SYSTEMS, INC.; WESTERN PROGRESSIVE, LLC; DOES, 1-10,

Defendants-Appellees.

Appeal from the United States District Court for the Southern District of California Janis L. Sammartino, District Judge, Presiding

Submitted April 10, 2018**

* This disposition is not appropriate for publication and is not precedent except as provided by Ninth Circuit Rule 36-3. ** The panel unanimously concludes this case is suitable for decision without oral argument. See Fed. R. App. P. 34(a)(2). Pasadena, California

Before: SCHROEDER and M. SMITH, Circuit Judges, and DRAIN,*** District Judge.

Plaintiffs-Appellants Kanchana Karunaratne and Carla Karunaratne brought

suit against Defendants-Appellees alleging wrongful foreclosure and violations of

California Civil Code sections 2924(a)(6) and 2924.17; California Business and

Professions Code sections 17200 et seq. and 17500 et seq.; and the covenant of

good faith and fair dealing. Plaintiffs-Appellants are borrowers and trustors on a

deed of trust for residential property in Escondido, California. The gist of their

claims is that because the transfer of the deed of trust to a securitized trust in New

York was invalid, none of Defendants-Appellees has a beneficial interest allowing

them to foreclose. The district court dismissed the complaint, holding that

Plaintiffs-Appellants lacked standing to challenge the assignment of the deed of

trust.

Our review is de novo, see Knievel v. ESPN, 393 F.3d 1068, 1072 (9th Cir.

2005), and we may affirm on any ground supported by the record, see Gordon v.

Virtumundo, Inc., 575 F.3d 1040, 1047 (9th Cir. 2009). We have jurisdiction

pursuant to 28 U.S.C. § 1291, and we affirm.

*** The Honorable Gershwin A. Drain, United States District Judge for the Eastern District of Michigan, sitting by designation.

2 California law permits a wrongful foreclosure plaintiff to challenge an

assignment of the beneficial interest to the foreclosing entity only if that

assignment was void ab initio rather than merely voidable. See Yvanova v. New

Century Mortg. Corp., 365 P.3d 845, 861 (Cal. 2016). Plaintiffs-Appellants rely

on Glaski v. Bank of America, National Association, which held that the attempted

transfer of a note and security interest into a trust after the trust’s closing date is

void rather than voidable under New York law. 160 Cal. Rptr. 3d 449, 462–63

(Cal. Ct. App. 2013). However, New York courts “have rejected Glaski’s

interpretation of New York law,” and this court has held that a late assignment of a

deed of trust to a New York trust is voidable rather than void. In re Turner, 859

F.3d 1145, 1149 (9th Cir. 2017). Because a borrower lacks standing to challenge a

voidable transfer to which he or she is not a party, we affirm the district court’s

dismissal of Plaintiffs-Appellants’ claims.

This holding disposes of all of the claims that Plaintiffs-Appellants brought

in the district court. On appeal, Plaintiffs-Appellants add an additional argument

in support of their claim for breach of the covenant of good faith and fair dealing:

they argue that Defendants-Appellees “breached the covenant by failing to inform

[Plaintiffs-Appellants] their Loan was sold, thus depriving [Plaintiffs-Appellants]

of the opportunity to negotiate with the true creditor.” “As a general rule, we will

not consider arguments that are raised for the first time on appeal.” Smith v.

3 Marsh, 194 F.3d 1045, 1052 (9th Cir. 1999). Even if we did consider this

argument, however, it would fail. Plaintiffs-Appellants have offered no authority

in support of their proposition that “[Defendants-Appellees] had an obligation to

inform [Plaintiffs-Appellants] of [their] purported acquisition of the beneficial and

actual interest in [Plaintiffs-Appellants’] Note.”

Plaintiffs-Appellants also argue that the district court, in taking judicial

notice of their foreclosure documents, improperly accepted the truth or validity of

those documents. We need not decide this issue because Plaintiffs-Appellants’

lack of standing is evident from the face of their complaint without reference to

any judicially noticed documents.

Finally, the district court did not abuse its discretion by denying Plaintiffs-

Appellants leave to further amend their complaint because amendment would be

futile. See Cervantes v. Countrywide Home Loans, Inc., 656 F.3d 1034, 1041 (9th

Cir. 2011). No amendment could cure the complaint’s legal defects; as the alleged

late assignment of the note and deed of trust to the securitized trust was voidable

rather than void, Plaintiffs-Appellants cannot challenge that assignment.1

AFFIRMED.

1 Defendants-Appellees’ motion for judicial notice, filed on June 14, 2017, is denied as moot.