Cromwell v. Deutsche Bank National Trust Company as Trustee For Morgan Stanley Capital I Inc. Trust 2006 NC2 et al

Filing 25

ORDER. Signed by Judge Hamilton on 10/14/2011. (pjhlc1, COURT STAFF) (Filed on 10/14/2011)

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UNITED STATES DISTRICT COURT
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NORTHERN DISTRICT OF CALIFORNIA
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KIMBERLY S. CROMWELL,
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Plaintiff,

No. C 11-2693 PJH

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v.

ORDER

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For the Northern District of California

United States District Court

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DEUTSCHE BANK NATIONAL TRUST
COMPANY, et al.,

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Defendants.
_______________________________/

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Plaintiff Kimberly S. Cromwell filed this action on June 3, 2011, seeking to set aside

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a nonjudicial foreclosure. Defendants moved to dismiss, and on August 22, 2011, the court

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issued an order denying the motion.

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As the complaint failed to allege facts sufficient to establish diversity jurisdiction

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under 28 U.S.C. § 1332, and because the court is required to determine – sua sponte if

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necessary – whether it has subject matter jurisdiction, the court directed plaintiff to show

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cause in writing why the court should not dismiss the federal claims alleged in the

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complaint (claims under 18 U.S.C. §§ 1341 and 1343, and the Fair Debt Collection

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Practices Act (“FDCPA”), 15 U.S.C. § 1682, et seq.).

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On September 7, 2011, plaintiff filed a response to the order to show cause, in which

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she conceded that she could not state a claim under 18 U.S.C. §§ 1341 and 1343.

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Accordingly, those claims are DISMISSED.

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Plaintiff also argued that the allegations of FDCPA violations do apply to defendants

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in this action. The FDCPA was enacted to protect debtors from false, deceptive, or

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misleading representations or tactics with respect to the collection of debts. See 15 U.S.C.

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§ 1692(e). To plead entitlement to relief under the FDCPA, a plaintiff must allege that the

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defendant was collecting debt as a debt collector, and that its debt collection actions

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violated some provision of the FDCPA. See Jerman v. Carlisle, 130 S.Ct. 1605, 1606

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(2010) (citing 15 U.S.C. § 1692 et seq.). A “debt” is defined as “any obligation or alleged

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obligation of a consumer to pay money arising out of a transaction in which the money,

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property, insurance, or services which are the subject of the transaction are primarily for

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personal, family, or household purposes, whether or not such obligation has been reduced

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to judgment.” 15 U.S.C. § 1692a(5).

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The provisions of the FDCPA are limited to “debt collectors.” Id. § 1692a. A “debt
collector” is “[1] any person who uses any instrumentality of interstate commerce or the

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For the Northern District of California

United States District Court

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mails in any business the principal purpose of which is the collection of any debts, or [2]

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who regularly collects or attempts to collect, directly or indirectly, debts owed or due or

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asserted to be owed or due another.” Id. § 1692a(6). Excluded from this definition is “any

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person collecting or attempting to collect any debt owed or asserted to be owed or due

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another to the extent such activity . . . (iii) concerns a debt which was not in default at the

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time it was obtained.” Id. § 1692a(6)(F).

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Also, under the FDCPA, a creditor is “any person who offers or extends credit

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creating a debt or to whom a debt is owed, but such term does not include any person to

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the extent that he receives an assignment or transfer of a debt in default solely for the

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purpose of facilitating collection of such debt for another.” Id. § 1692a(4). Accordingly,

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collecting a debt not for another, whether or not the debt is assigned in default, makes one

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a creditor (not a debt collector). This is in keeping with the legislative history of the FDCPA,

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which highlights Congress's intent to police the coercive, unrestrained activities of third

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party debt collectors as distinct from debt servicers. See McKinney v. Cadleway, 548 F.3d

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496, 501 (7th Cir.2008).

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The legislative history of § 1692a(6) indicates the term “debt collector” does not

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include a mortgage servicing company or an assignee of a debt if the debt was not in

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default at the time it was assigned. See S.Rep. No. 95–382, 95th Cong., 1st Sess. 3,
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reprinted in 1977 U.S.Code Cong. & Ad.News 1695, 1698 (“[T]he committee does not

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intend the definition [of ‘debt collector’] to cover . . . the collection of debts, such as

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mortgages . . . , by persons who originated such loans; [or] mortgage service companies

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and others who service outstanding debts for others, so long as the debts were not in

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default when taken for servicing[.]”).

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Thus, courts have held that a nonjudicial foreclosure pursuant to a deed of trust

Washington Mutual Bank, 2009 WL 3047238, at *3 (N.D. Cal. Sept.18, 2009); see

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also Hanaway v. JPMorgan Chase Bank, 2011 WL 672559, at *4 (C.D. Cal. Feb. 15, 2011)

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(because “a transfer in interest is the aim of a foreclosure, and not a collection of debt, the

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For the Northern District of California

does not constitute “debt collection” within the meaning of the FDCPA. See Landayan v.

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United States District Court

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foreclosure proceeding is not a debt collection action under the FDCPA.”); Aniel v. T.D.

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Serv. Co., 2010 WL 3154087, at *1 (N.D. Cal. Aug. 9, 2010) (“allegations relating to the

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FDCPA claim relate to foreclosure proceedings and courts throughout this circuit have

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concluded that foreclosure does not constitute ‘debt collection’ under the FDCPA”);

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Deissner v. Mortgage Elec. Regis. Sys., 618 F.Supp. 2d 1184, 1189 (D. Ariz. 2009)

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(“activity of foreclosing on [a] property pursuant to a deed of trust is not collection of a debt

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within the meaning of the FDCPA.”), aff'd, 2010 WL 2464899 (9th Cir. Jun.17, 2010)

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(quotations and footnote omitted).

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As the court understands plaintiff’s argument, she contends that none of the

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defendants named in this action is the lender, the mortgage servicing company, or an

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“assignee of a debt,” and that for this reason, defendants can be considered “debt

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collectors” for purposes of the FDCPA. She also asserts that the foreclosure was wrongful

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under California law because it depended in part on the assignment of the deed of trust,

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which the Superior Court of California, County of Contra Costa, found in a prior action to

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have been invalid.

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Nevertheless, apart from any allegation that the foreclosure was wrongful because

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defendants violated various state laws, the FDCPA cause of action is so deficiently pled

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that it seems likely that defendants will be unable to provide any meaningful response. For
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example, the complaint does not allege facts showing that any of the named defendants

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can be considered a “debt collector” under the FDCPA. Moreover, the complaint asserts

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that “Ndex West violated 15 U.S.C. [sic] by using false, deceptive, and misleading

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representations or means in the collection of Plaintiff’s debt (alleged),” Cplt at 22:16-17,

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and that “DBNTC in its individual and Trustee capacity, acted negligently under 15 U.S.C.

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[sic] by knowingly allowing its agents to design, compile, and furnish forms knowing they

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would be used to create a false belief . . . that someone other than the actual creditor was

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participating in an effort to collect his debt . . . ,” Cplt at 23:1-4, but it is impossible to tell

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from these allegations which provisions of the FDCPA plaintiff alleges were violated, or

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For the Northern District of California

United States District Court

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how.
Accordingly, no later than November 10, 2011, plaintiff shall file a first amended

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complaint, in which the FDCPA cause of action is re-pled. Plaintiff must adequately allege

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facts showing that each defendant can be considered a debt collector, and that each

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defendant violated an identified provision of the FDCPA. Plaintiff may add no additional

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causes of action or defendants without leave of court. Defendants’ response to the first

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amended complaint will be due no later than 28 days following the date the first amended

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complaint is filed.

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The order to show cause is discharged.

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IT IS SO ORDERED.

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Dated: October 14, 2011
______________________________
PHYLLIS J. HAMILTON
United States District Judge

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