720 F.3d 1163 (9th Cir. 2013), 11-16597, Zadrozny v. Bank of New York Mellon

Docket Nº:11-16597.
Citation:720 F.3d 1163
Opinion Judge:RAWLINSON, Circuit Judge:
Party Name:Edward ZADROZNY, husband; Kymberly Zadrozny, Plaintiffs-Appellants, v. BANK OF NEW YORK MELLON, as Trustee for the Certificate Holders CWALT, Inc. Alternative Loan Trust 2005-59-Mortgage Pass-Through Certificates, Series 2005-59, fka Bank of New York; BAC Home Loans Servicing LP, a California Corporation; Soma Financial Incorporated; First American
Attorney:Donald O. Loeb, Donald O. Loeb, P.L.C., Scottsdale, AZ, for Plaintiffs-Appellants. Emily S. Cates (argued) and Milton A. Wagner, Lewis and Roca, Phoenix, AZ, for Defendants-Appellees.
Judge Panel:Before: STEPHEN S. TROTT, JOHNNIE B. RAWLINSON, and RICHARD D. CUDAHY,[*] Circuit Judges.
Case Date:June 28, 2013
Court:United States Courts of Appeals, Court of Appeals for the Ninth Circuit
 
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720 F.3d 1163 (9th Cir. 2013)

Edward ZADROZNY, husband; Kymberly Zadrozny, Plaintiffs-Appellants,

v.

BANK OF NEW YORK MELLON, as Trustee for the Certificate Holders CWALT, Inc. Alternative Loan Trust 2005-59-Mortgage Pass-Through Certificates, Series 2005-59, fka Bank of New York; BAC Home Loans Servicing LP, a California Corporation; Soma Financial Incorporated; First American Title Insurance Company, a Texas Corporation; Recontrust Company NA; NV Mortgage, Defendants-Appellees.

No. 11-16597.

United States Court of Appeals, Ninth Circuit

June 28, 2013

         Argued and Submitted Dec. 3, 2012.

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         Donald O. Loeb, Donald O. Loeb, P.L.C., Scottsdale, AZ, for Plaintiffs-Appellants.

          Emily S. Cates (argued) and Milton A. Wagner, Lewis and Roca, Phoenix, AZ, for Defendants-Appellees.

         Appeal from the United States District Court for the District of Arizona, Roslyn O. Silver, Chief District Judge, Presiding. D.C. No. 2:10-cv-01200-ROS.

          Before: STEPHEN S. TROTT, JOHNNIE B. RAWLINSON, and RICHARD D. CUDAHY,[*] Circuit Judges.

         OPINION

          RAWLINSON, Circuit Judge:

         Appellants Edward and Kymberly Zadrozny (the Zadroznys) challenge the dismissal of their first amended complaint against Defendants/Appellees. The Zadroznys contend that the district court erred in dismissing their claims that Appellees improperly initiated non-judicial foreclosure proceedings after the Zadroznys failed to comply with the mortgage obligations financing their residence. The Zadroznys also challenge the district court's denial of leave to further amend their Complaint. We affirm.

         I. BACKGROUND

         On August 17, 2005, the Zadroznys borrowed $543,600 from Defendant/Appellee Soma Financial, Inc. (Soma) pursuant to a promissory note secured by a deed of trust. The promissory note provided that " Lender may transfer this Note...." The deed of trust stated that " [t]he Note or a partial interest in the Note (together with the Security Instrument) can be sold one or more times without prior notice to Borrower. A sale might result in a change in the entity (known as the Loan Servicer) that collects Periodic Payments due under the Note and this Security Instrument and performs other mortgage loan servicing obligations under the Note ..." The deed of trust provided that Defendant/Appellee First American Title Insurance Company (First American) served as the trustee, and that Mortgage Electronic Registration Systems, Inc. (MERS) served as the nominee for the lender, Soma, and Soma's successors and assigns, as " the beneficiary under this Security Instrument." Additionally, the deed of trust provided: " Borrower understands and agrees that MERS holds only legal title to the interests granted by Borrower in this Security Instrument but, if necessary to comply with law or custom, MERS (as nominee for Lender and Lender's successors and assigns) has the right: to exercise any or all of those interests, including, but not limited to, the right to foreclose and sell the Property ..."

         The deed of trust allowed for appointment of a successor trustee, specifying that " [l]ender may, for any reason or cause, from time to time remove Trustee and appoint a successor trustee to any Trustee appointed hereunder. Without conveyance of the Property, the successor trustee shall succeed to all the title, power and duties conferred upon Trustee herein and by Applicable Law."

          On January 27, 2010, MERS transferred, assigned, and granted " all beneficial interest" in the Zadroznys' deed of trust to Defendant/Appellee Bank of New York Mellon (Bank of New York) pursuant to a Corporation Assignment of Deed of Trust. Bank of New York subsequently appointed Defendant/Appellee Reconstrust

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Company NA (Recontrust) as successor trustee.

         On January 29, 2010, the Zadroznys were notified that they were in breach of their mortgage payment obligation of $571,157.97, and that " the Beneficiary, in said Deed of Trust has elected to sell or cause to be sold the Trust property described in said Deed of Trust at a Trustee's Sale ..." The Statement of Breach or Non Performance and Election To Sell Under Deed of Trust Arizona listed Recontrust as the successor trustee. Pursuant to a Notice of Trustee's Sale, Recontrust initiated non-judicial foreclosure proceedings against the Zadroznys.

         On March 22, 2010, the Zadroznys filed a lawsuit in Arizona state court challenging the documents supporting the non-judicial foreclosure and the transfer of the property interests to the successor trustee. Appellees removed the lawsuit to federal court based on diversity jurisdiction. On July 8, 2010, without first obtaining leave to amend, the Zadroznys filed a first amended complaint with a new claim that Soma lacked the requisite license. The district court struck the first amended complaint because it was unclear which claims the Zadroznys were pursuing. On January 26, 2011, the Zadroznys filed a subsequent first amended complaint alleging, inter alia, that (1) MERS lacked the authority to serve as a nominee; (2) Soma, Bank of New York, and Defendant/Appellee BAC Home Loans Servicing LP (BAC) engaged in fraudulent representation regarding their authority to foreclose; and (3) A.R.S. § 33-811(B) is unconstitutional because of the various assignments and because of participation by MERS without notice to borrowers.

         Defendants/Appellees filed a motion to dismiss, which the district court granted. The district court rejected the Zadroznys' claims that the lenders were required to produce the note prior to foreclosure and that the note was unenforceable because it was not properly securitized. The district court dismissed the Zadroznys' negligent misrepresentation and fraudulent concealment claims as barred by the statute of limitations, holding that the Zadroznys never contested this issue. The district court also dismissed the Zadroznys' complaint without leave to amend because the amended complaint lacked any viable claims.

         The Zadroznys filed a timely notice of appeal.

         II. STANDARDS OF REVIEW

         " We review de novo the district court's decision to grant Defendants' motion to dismiss under Rule 12(b)(6)." Henry A. v. Willden, 678 F.3d 991, 998 (9th Cir.2012) (citation omitted). " We accept as true all well pleaded facts in the complaint and construe them in the light most favorable to the nonmoving party." Id. (citation omitted).

         " We also review whether the district court abused its discretion by dismissing the complaint without granting leave to amend." Id. (citation omitted).

         III. DISCUSSION

         A. Assignment and Transfer of the Note and Deed of Trust To Bank of New York

          Relying on In re Veal, 450 B.R. 897 (9th Cir. BAP 2011), the Zadroznys contend that the district court erred in dismissing their claim that Bank of New York lacked standing to...

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