David Turner v. Wells Fargo Bank
2017 U.S. App. LEXIS 10622
| 9th Cir. | 2017Background
- Rosanna and David Turner (borrowers/trustors) executed a deed of trust (DOT) on a Livermore, CA residence in 2005; Wells Fargo was named lender/beneficiary and Fidelity National Title as trustee.
- Wells Fargo sold the loan and note to Citigroup in 2005, and the loan was to be transferred into a securitized trust (CMLTI Trust) within 90 days per the Pooling and Servicing Agreement (PSA); transfers to Citigroup and then to U.S. Bank as trustee occurred years later (2011–2012).
- NBS Default Services recorded a Notice of Default (Feb 10, 2012), a Substitution of Trustee naming NBS was recorded May 2, 2012, and a Notice of Trustee’s Sale was recorded May 16, 2012.
- The Turners filed bankruptcy (June 4, 2012); after they defaulted on plan payments, U.S. Bank obtained relief from stay and moved to foreclose. The Turners brought an adversary complaint challenging assignments, foreclosure, and statutory/contract claims.
- The bankruptcy court dismissed five claims without leave to amend; the BAP affirmed. The Ninth Circuit reviewed de novo and affirms dismissal as futile or for lack of standing.
Issues
| Issue | Plaintiff's Argument (Turner) | Defendant's Argument (Wells Fargo/Citigroup/U.S. Bank/NBS) | Held |
|---|---|---|---|
| Whether late transfers/assignments rendered assignments void (so foreclosure wrongful) | Assignments into the trust were void (not merely voidable) for failing to meet the PSA 90‑day transfer requirement, making foreclosure wrongful | Failure to comply with PSA makes transfers voidable, not void; borrower lacks remedy to void foreclosure | Transfers were at most voidable; wrongful foreclosure claim dismissed |
| Whether borrowers are third‑party beneficiaries of the PSA and can sue for breach | Turners argue they are third‑party beneficiaries of the PSA and can enforce it | Numerous California authorities hold borrowers are not third‑party beneficiaries of PSA; no standing to enforce | Turners are not third‑party beneficiaries; PSA‑based contract and covenant claims dismissed |
| Whether DOT/Trustee substitution and Notices breached DOT or impaired borrower rights | Turners claim Wells Fargo had to execute Notice of Default and late substitution invalidates NBS’s notices; alleged concealed beneficiary harmed ability to pay | DOT permits beneficiary to cause trustee to issue notice; recorded substitution confers authority; no pleaded prejudice or damages from identity issues | Claims under DOT (breach and covenant) dismissed for lack of actionable breach or damages |
| Whether statutory claims under Cal. Civ. Code §2923.5 and UCL stand | Turners assert violations: §2923.5 (notice prerequisites) and UCL based on allegedly invalid recordings | §2923.5’s remedy is postponement of sale; recorded docs show compliance/timely notice; Turners defaulted and would have lost home regardless, so no UCL standing | §2923.5 and UCL claims dismissed; Turners lack statutory remedy/standing |
Key Cases Cited
- Aalfs v. Wirum (In re Straightline Invs., Inc.), 525 F.3d 870 (9th Cir. 2008) (standard for BAP review)
- Cervantes v. Countrywide Home Loans, Inc., 656 F.3d 1034 (9th Cir. 2011) (standard for reviewing dismissal for failure to state a claim)
- Thinket Ink Info. Res., Inc. v. Sun Microsystems, Inc., 368 F.3d 1053 (9th Cir. 2004) (standard on denial of leave to amend and futility)
- Yvanova v. New Century Mortg. Corp., 365 P.3d 845 (Cal. 2016) (distinguishing void vs. voidable assignments in wrongful foreclosure context)
- Rajamin v. Deutsche Bank Nat’l Trust Co., 757 F.3d 79 (2d Cir. 2014) (New York authority treating trustee acts as voidable, not void)
- Jenkins v. JP Morgan Chase Bank, N.A., 156 Cal. Rptr. 3d 912 (Ct. App. 2013) (borrowers lack standing as third‑party beneficiaries to enforce PSA)