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In re Turner

United States Court of Appeals, Ninth Circuit

June 15, 2017

In re Rosanna Mac Turner, Debtor,
v.
Wells Fargo Bank NA; Citigroup Global Markets Realty Corp.; U.S. Bank, as Trustee for the Citigroup Mortgage Loan Trust Inc., Mortgage Pass-Through Certificates, Series 2005-4; Citimortgage Inc., Appellees. David G. Turner; Rosanna Mac Turner, Appellants,

          Submitted April 19, 2017 [*] San Francisco, California

         Appeal from the Ninth Circuit Bankruptcy Appellate Panel No. 14-1139 Kirscher, Dunn, and Taylor, Bankruptcy Judges, Presiding

          Michael Yesk, Pleasant Hill, California, for Appellants.

          Bernard J. Kornberg, Mark D. Lonergan, and Jan T. Chilton, Severson & Werson, San Francisco, California, for Appellees.

          Before: Richard A. Paez and Sandra S. Ikuta, Circuit Judges, and Susan R. Bolton, [**] District Judge.

         SUMMARY[***]

         Bankruptcy

         The panel affirmed the Bankruptcy Appellate Panel's decision affirming the bankruptcy court's dismissal of an adversary proceeding.

         After the bankruptcy court granted relief from the automatic stay to allow a foreclosure to proceed, the debtors filed an adversary proceeding alleging that the transfer of a deed of trust for their property to a mortgage-backed security trust, which was securitized pursuant to a Pooling and Servicing Agreement, was void and a breach of the Agreement because it was not effectuated within the ninety-day period established by the Agreement.

         The panel held that the debtors failed to state a claim for wrongful foreclosure under California law. Under Yvanova v. New Century Mortg. Corp., 365 P.3d 845 (Cal. 2016), a home loan borrower has standing to claim a nonjudicial foreclosure was wrongful because an assignment by which the foreclosing party purportedly took a beneficial interest in the deed of trust was not merely voidable but void. The panel held that the fact that the assignments of the deed of trust were made well after the ninety-day timeframe merely rendered the transfer voidable, not void. Accordingly the debtors lacked standing to claim wrongful foreclosure.

         The panel held that the debtors did not properly allege a claim for breach of contract or breach of the implied covenant of good faith and fair dealing because, as borrowers, they were not third-party beneficiaries of the Pooling and Servicing Agreement.

         The panel held that the debtors did not state a claim for breach of the express terms of the deed of trust in the execution of the notice of default, or for breach of the implied covenant of good faith and fair dealing. They also failed to state a claim for violation of Cal. Civ. Code § 2923.5 or for unfair competition under Cal. Bus. & Prof. Code 17200.

          OPINION

          BOLTON, District Judge.

         This appeal arises from the judgment of the Bankruptcy Appellate Panel ("BAP") affirming the bankruptcy court's order granting Appellees'[1] motion to dismiss Rosanna Mac Turner's and David Turner's ("Appellants" or "Turners") Adversary Complaint without leave to amend.

         The Turners are the borrowers and Trustors on a Deed of Trust ("DOT") for residential property in Livermore, California. The DOT was recorded on May 16, 2005 naming Fidelity National Title Insurance Company as Trustee and Appellee Wells Fargo, N.A. ("Wells Fargo") as both Lender and Beneficiary. On or around August 2005, Wells Fargo sold the DOT along with the Turners' promissory note to Citigroup Global Markets Realty Corp. ("Citigroup"). Citigroup deposited them into a mortgage-backed security trust (the "CMLTI Trust"), which was securitized pursuant to a Pooling and Servicing Agreement ("PSA") and named Appellee U.S. Bank, N.A. ("U.S. Bank") as Trustee. The CMLTI Trust, a tax-exempt real estate mortgage investment conduit trust, required the transfer of all assets to the trust within ninety days of the Trust Pool's August 29, 2005 ...


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