In re Kimberly Dawn Franklin

Case Type:
Case Status:
19-1149 (9th Circuit, Jun 24,2021) Not Published
The Bankruptcy Appellate Panel of the Ninth Circuit (BAP) affirmed the bankruptcy court’s order granting the motion to dismiss the third amended complaint of Kimberly Franklin (DR) against U.S. Bank N.A. (USB), which sought to disallow the Bank’s proof of claim and barring the Bank’s enforcement of its interest in the DR’s residence (Property), due to the DR’s failure to timely respond and failure to state a plausible claim.
Procedural context:
As an offshoot of her main Chapter 13 case, the DR filed multiple complaints against USB in its role as the Trustee for LSF9 Master Participation Trust that aimed for the disallowance of USB’s proof of claim and the attainment of a judgment prohibiting USB from enforcing its interest in Debtor’s residence. In this regard, the DR alleged that USB lacked standing to assert a claim because the promissory note was improperly endorsed, had committed mortgage fraud under the Fraud Enforcement and Recovery Act of 2009 (FERA), and had subjected her to intentional and negligent infliction of emotional harm. The United States Bankruptcy Court for the Southern District of California (BC) ultimately dismissed the DR’s third amended complaint as the DR continued to base her every pleading on substantively incorrect law, essentially ignoring that, regardless of the note's endorsement, California law authorized its assignment, and had filed her opposition after the relevant deadline’s passing.
In June 2006, the DR borrowed $690,000 from First Magnus Financial Corporation (FM) to refinance an existing mortgage on the Property. The DR executed a promissory note in favor of First Magnus and a deed of trust in favor of Mortgage Electronic Registration Systems, Inc., as FM’s nominee. Per the note and deed of trust, FM could transfer its interests without prior notice to the DR. FM recorded the deed of trust in July 2006. After a series of subsequent recorded assignments, USB ended up with it in 2016. However, while FM had endorsed it as payable to one predecessor, and that predecessor had then endorsed it as payable to another, by the time it reached USB, it had been endorsed in blank. In September 2016, USB recorded a notice of default and election to sell under the deed of trust which indicated that DR was in default by the amount of $416,959.03. In January 2017, USB’s servicer recorded a notice of trustee’s sale. In January 2017, the DR filed a chapter 13 petition. After USB filed its proof, the DR announced her intent to file an adversary complaint to challenge the validity of the claim. For this reason, in fact, the DR did not provide for payment of the USB claim in her plan. In September 2017, the BC confirmed this plan. Meanwhile, the DR filed one complaint, followed by an amended one, which USB targeted with a motion to dismiss (First MTD). One day after the BC’s deadline for filing a responsive brief or an amended complaint, the DR filed her own motion to dismiss, with a proposed second amended complaint attached. After the BC granted the First MTD, it afforded the DR a chance to file a new complaint within three weeks. The DR did meet this deadline—but she then filed a different third amended complaint. Once more, USB moved to dismiss by motion (MTD). This MTD gave the DR a fourteen-day deadline to respond. Nearly six weeks later, the DR filed her opposition.
Gary A. Spraker; Scott H. Gan; and Julia W. Brand

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