Aguilar v. Greenspoon Marder P.A.

Filing 13

ORDER Granting Defendant's 8 Motion to Dismiss. The Court grants Defendant's Motion to Dismiss, (ECF No. 8 ), and dismisses without prejudice Plaintiff's Complaint, (ECF No. 1 ). Signed by Judge Janis L. Sammartino on 3/9/2018. (mpl)

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UNITED STATES DISTRICT COURT

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SOUTHERN DISTRICT OF CALIFORNIA

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ILIANA AGUILAR, on behalf of herself
and all other similarly situated individuals,

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ORDER GRANTING DEFENDANT’S
MOTION TO DISMISS

Plaintiff,

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Case No.: 17-CV-876 JLS (BGS)

v.
(ECF No. 8)

GREENSPOON MARDER, P.A.,
Defendant.

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Presently before the Court is Defendant Greenspoon Marder, P.A.’s Motion to

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Dismiss Plaintiff’s Complaint. (“MTD,” ECF No. 8.) Also before the Court are Plaintiff

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Iliana Aguilar’s Opposition to, (“Opp’n, ECF No. 9), and Defendant’s Reply in Support

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of, (“Reply,” ECF No. 10), Defendant’s Motion. The Court vacated the hearing on

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Defendant’s Motion to Dismiss and took the matter under submission without oral

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argument pursuant to Civil Local Rule 7.1(d)(1). (ECF No. 11.) Having considered the

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parties’ arguments and the law, the Court GRANTS Defendant’s Motion to Dismiss.

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BACKGROUND

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Sometime in 2006, Plaintiff incurred a debt to Westgate Flamingo Bay, LLC,

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which, allegedly, sold, transferred, or assigned the debt to Defendant, a law firm.

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(“Compl.,” ECF No. 1, ¶ 17.) On January 18, 2017, Defendant sent a letter to Plaintiff
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17-CV-876 JLS (BGS)

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attempting to collect on the debt (“the Letter”). (Id. ¶ 19.) The Letter stated: “The total

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past due amount is $14,059.16, plus any interest and late charges which have been added

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to your account balance.” (Id. ¶ 20.) It went on to disclose:

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If you do not dispute the validity of the debt or any portion
thereof, you can cure the default by paying $14,059.16, within
thirty-five (35) days after your receipt of this notice. If after
thirty (30) days after your receipt of this notice, you have not
disputed the debt or any portion of the debt, and you have not
paid the past due amount after thirty-five (35) days after your
receipt of this notice, your indebtedness may be accelerated and
foreclosure proceedings may be instituted.

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(Id. ¶ 30.) The Letter also stated that Defendant is a law firm retained by Westgate

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Flamingo Bay, LLC to “invoke the power of sale provided by the Deed of Trust executed

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by you with regard to the above referenced unit and week at Westgate Flamingo Bay, Las

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Vegas.”1 (“Ex. A,” ECF No. 8-2, at 2.) The Letter notified Plaintiff that she had failed to

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make monthly installment payments since February 10, 2009 and the total past due

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amount was $14,059.16. (Id.) The Letter disclosed to Plaintiff that she could obtain

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verification of the debt, but unless she disputed the validity of the debt within thirty days,

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the debt would be assumed valid. (Id.) Finally, Defendant provided a toll-free phone

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number to discuss the matter in more detail. (Id.)

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Plaintiff alleges this Letter violates various provisions of the Fair Debt Collection
Practices Act (“FDCPA”), 15 U.S.C. § 1692, et seq.

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LEGAL STANDARD

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Federal Rule of Civil Procedure 12(b)(6) permits a party to raise by motion the

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defense that the complaint “fail[s] to state a claim upon which relief can be granted,”

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Plaintiff did not include the letter in her Complaint. Defendant requests the Court take judicial notice
of the letter because the Complaint necessarily relies on the letter and its authenticity is not in doubt.
(MTD 3); see Lee v. City of Los Angeles, 250 F.3d 668, 688–89 (9th Cir. 2001). Plaintiff does not
oppose the request and also relies on the Letter in her Opposition brief. (See, e.g., Opp’n 13.)
Therefore, the Court GRANTS Defendant’s request and will consider the contents of the January 2017
letter. (See Ex. A, ECF No. 8-2.)
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generally referred to as a motion to dismiss. The Court evaluates whether a complaint

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states a cognizable legal theory and sufficient facts in light of Federal Rule of Civil

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Procedure 8(a), which requires a “short and plain statement of the claim showing that the

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pleader is entitled to relief.”

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allegations,’ . . . it demands more than an unadorned, the-defendant-unlawfully-harmed-

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me accusation.” Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009) (quoting Bell Atl. Corp. v.

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Twombly, 550 U.S. 544, 555 (2007)). In other words, “a plaintiff’s obligation to provide

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the ‘grounds’ of his ‘entitle[ment] to relief’ requires more than labels and conclusions,

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and a formulaic recitation of a cause of action’s elements will not do.” Twombly, 550

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U.S. at 555 (alteration in original). “Nor does a complaint suffice if it tenders ‘naked

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assertion[s]’ devoid of ‘further factual enhancement.’” Iqbal, 556 U.S. at 678 (alteration

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in original) (quoting Twombly, 550 U.S. at 557).

Although Rule 8 “does not require ‘detailed factual

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“To survive a motion to dismiss, a complaint must contain sufficient factual

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matter, accepted as true, to ‘state a claim to relief that is plausible on its face.’” Id.

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(quoting Twombly, 550 U.S. at 570); see also Fed. R. Civ. P. 12(b)(6). A claim is facially

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plausible when the facts pled “allow[] the court to draw the reasonable inference that the

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defendant is liable for the misconduct alleged.” Id. (citing Twombly, 550 U.S. at 556).

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That is not to say that the claim must be probable, but there must be “more than a sheer

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possibility that a defendant has acted unlawfully.” Id. (citing Twombly, 550 U.S. at 556).

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“[F]acts that are ‘merely consistent with’ a defendant’s liability” fall short of a plausible

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entitlement to relief. Id. (quoting Twombly, 550 U.S. at 557). Further, the Court need not

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accept as true “legal conclusions” contained in the complaint. Id. at 678–79 (citing

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Twombly, 550 U.S. at 555). This review requires “context-specific” analysis involving

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the Court’s “judicial experience and common sense.” Id. at 679. “[W]here the well-

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pleaded facts do not permit the court to infer more than the mere possibility of

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misconduct, the complaint has alleged—but it has not ‘show[n]’—‘that the pleader is

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entitled to relief.’” Id. (quoting Fed. R. Civ. P. 8(a)(2)).

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The Court will grant leave to amend unless it determines that no modified
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contention “consistent with the challenged pleading . . . [will] cure the deficiency.”

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DeSoto v. Yellow Freight Sys., Inc., 957 F.2d 655, 658 (9th Cir. 1992) (quoting Schriber

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Distrib. Co. v. Serv-Well Furniture Co., 806 F.2d 1393, 1401 (9th Cir. 1986)).

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ANALYSIS

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To state a claim for a FDCPA violation a plaintiff must demonstrate: (1) she is a

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“consumer” under 15 U.S.C. § 1692a(3); (2) the debt arises out of a transaction entered

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into for personal purposes; (3) the defendant is a “debt collector” under 15 U.S.C.

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§ 1692a(6); and (4) the defendant violated one of the provisions contained in 15 U.S.C.

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§§ 1692a–1692o. Wheeler v. Premiere Credit of N. Am., LLC, 80 F. Supp. 3d 1108, 1112

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(S.D. Cal. 2014) (citing Turner v. Cook, 362 F.3d 1219, 1226–27 (9th Cir. 2004)).

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Defendant argues that Plaintiff fails to meet the third and fourth elements.

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I.

Debt Collection Activity vs. Enforcing Security Interest

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The FDCPA defines “debt” as “any obligation or alleged obligation of a consumer

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to pay money arising out of a transaction in which the money, property, insurance, or

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services which are the subject of the transaction are primarily for personal, family, or

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household purposes, whether or not such obligation has been reduced to judgment.” 15

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U.S.C. § 1692a(5).

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instrumentality of interstate commerce or the mails in any business the principal purpose

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of which is the collection of any debts,” or (2) “who regularly collects or attempts to

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collect, directly or indirectly, debts owed or due or asserted to be owed or due to

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another.” § 1692a(6).

A “debt collector” includes any person: (1) “who uses any

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Defendant argues that the Letter did not seek the collection of a debt; instead, it

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attempted to foreclose a security interest. (See MTD 3–4.) Therefore, Defendant argues

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it does not meet the definition of debt collector under 15 U.S.C. § 1692a(6) and Ninth

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Circuit precedent.

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In Vien-Phuong Thi Ho v. ReconTrust Co., 858 F.3d 568, 570 (9th Cir.), cert.

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denied, 138 S. Ct. 504 (2017) (“Ho”), the Ninth Circuit defined when a trustee of a

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California deed of trust qualifies as a debt collector under the FDCPA. There, the
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plaintiff bought a house with a loan secured by a deed of trust. Id. After the plaintiff

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missed several loan payments, the defendant initiated a non-judicial foreclosure by

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recording a notice of default and sent the notice to the plaintiff along with warnings to

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pay the outstanding balance on the loan or face non-judicial foreclosure and auctioning of

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the property. Id.

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The Ninth Circuit affirmed the holding of Hulse v. Ocwen Federal Bank, FSB, 195

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F. Supp. 2d 1188, 1204 (D. Or. 2002), which held that “foreclosing on a trust deed is an

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entirely different path than collecting funds from a debtor.”

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(quotation marks omitted). The Ho court distinguished between a person attempting to

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enforce his or her rights through a non-judicial foreclosure and attempting to collect

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money. Id. at 571. In support of this conclusion, the court reasoned that the definition of

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debt collector in section 1692a(6) distinguishes between entities that collect debts owed

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and a narrower definition of debt collector, which “also includes” entities whose principal

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business purpose is “the enforcement of security interests.” See id. at 572–73 (citing

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§§ 1692a(6), 1692f(6)). Thus, “an entity does not become a general ‘debt collector’ if its

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‘only role in the debt collection process is the enforcement of a security interest.’” Id. at

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573 (citing Wilson v. Draper & Goldberg, P.L.L.C., 443 F.3d 373, 378 (4th Cir. 2006);

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and Glazer v. Chase Home Fin. LLC, 704 F.3d 453, 464 (6th Cir. 2013)). In applying its

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holding, the court decided that a non-judicial foreclosure was the enforcement of a

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security interest and not the collection of a monetary debt. Therefore, the “right to

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‘enforce’ the security interest necessarily implies the right to send the required notices; to

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hold otherwise would divorce the notices from their context.” Id.

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II.

Ho, 858 F.3d at 572

Plaintiff’s Arguments

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The question here is whether Defendant was involved in enforcing a security

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interest. Plaintiff advances four arguments in support of her thesis that Defendant’s

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Letter was not enforcing a security interest. The Court considers each in turn.

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A. Whether Ho Applies to Defendant
The Court addresses Plaintiff’s first and second arguments together because both
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arguments rely on Vien-Phuong Thi Ho v. Recontrust Co. First, Plaintiff argues that

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Defendant does not fall under the Ho security interest exception because Defendant did

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not record a notice of default, and only sought to collect the debt prior to pursuing any

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foreclosure efforts. (Opp’n 11 (citing Ex. A).) The Ho court relied on California’s non-

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judicial foreclosure statutes that requires a trustee to send to the borrower the notice of

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default and notice of sale.

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emphasizes that, in Ho, the recorded notice of default notified the borrower that the

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foreclosure process had begun, explained the foreclosure timeline, appraised the borrower

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of her rights, and stated the borrower could contact the creditor if she wished to make

(Id. (citing Ho, 858 F.3d at 570–73, 575).)

Plaintiff

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payment. (Id. (quoting Ho, 858 F.3d at 573).)

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Letter that she characterizes as “additional FDCPA language.” (Id. at 12). This language

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includes a thirty-five day payment demand, opportunity to dispute debt, and offer to

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verify debt. (See id.) Plaintiff argues this language further supports her contention that

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Defendant “engage[d] in activities that constitute debt collection.” (Id. (citing Ho, 858

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F.3d at 573).)

Plaintiff also points to elements in the

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Second, Plaintiff argues that Ho’s security interest exception applies only to

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trustees and Defendant is not the trustee of Plaintiff’s Deed of Trust. (Id. at 13.) Instead,

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Plaintiff states that Defendant is a law firm retained by the original creditor to collect on a

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defaulted debt.2 (Id.) Plaintiff also points out that the Ho court found it persuasive that

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the borrower could cure by paying the creditor and not the defendant.

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distinguishes this factor because she reads the Letter as requiring her to pay Defendant

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directly. (Id. (“[I]f you pay the amount shown above, an adjustment may be necessary

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after we receive your check or payment.” (quoting Ex. A, at 2)).)

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Plaintiff

Defendant counters that it represents the trustee, Westgate Flamingo Bay, LLC and

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In her Complaint, Plaintiff alleges that Westgate Flamingo Bay sold, transferred, or assigned the debt
to Defendant. (Compl. ¶ 17.) Yet in her Opposition, Plaintiff contends Defendant is only a law firm
retained by the original creditor to collect on a defaulted debt. (Opp’n 13.) The distinction between
these two positions does not impact the Court’s analysis because, under the relevant Nevada statute,
Nevada law applied to the trustee or a law firm representing the trustee. See infra section II.A.2.
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therefore Ho applies.

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distinguish Ho based on California’s non-judicial foreclosure statute, but the property

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here is in Nevada and Nevada law applies. (Id. at 4.)

(Reply 2–3.)

Defendant also argues that Plaintiff seeks to

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The Court agrees with Defendant that Nevada law applies to the case at bar.

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Plaintiff’s property is a timeshare in Las Vegas, Nevada. (See Ex. A, at 2.) Nevada

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federal district courts follow the rule in Hulse v. Ocwen, which Ho explicitly approved.

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See, e.g., Garcia-Pena v. MTC Fin., Inc., No. 17-cv-319-RCJ-WCG, 2017 WL 4532194,

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at *3 (D. Nev. Oct. 10, 2017); Contreras v. Master Fin., Inc., No. 10-cv-477-LRH-VPC,

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2010 WL 4608300, at *2 (D. Nev. Nov. 4, 2010). Thus, Ho is controlling to the extent

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that it does not rely on California non-judicial foreclosure law.

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1. Non-Judicial Foreclosure in Nevada

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Defendant argues that the Letter is a prerequisite to non-judicial foreclosure under

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Nevada law. (Reply 4.) Specifically, the Letter contains information required for a

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notice of breach and election to sell; therefore, Defendant contends it followed Nevada

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non-judicial foreclosure law. (See id.) In Ho, the Ninth Circuit determined that an entity

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that took the “statutorily required steps to conduct [a] trustee’s sale” was enforcing a

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security interest under California non-judicial foreclosure law. 858 F.3d at 573. Thus,

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the Court turns to Nevada non-judicial foreclosure law to determine whether Defendant

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took statutorily required steps to enforce Westgate Flamingo Bay’s security interest.

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In Nevada, “[w]hen a grantor defaults on [a promissory] note, the deed-of-trust

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beneficiary can elect either judicial process for foreclosure . . . or may pursue ‘non-

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judicial’ foreclosure-by-trustee’s sale procedure under Nevada Revised Statute Chapter

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107.” Edelstein v. Bank of N.Y. Mellon, 286 P.3d 249, 254 (Nev. 2012) (citing Nev. Land

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& Mortg. v. Hidden Wells, 435 P.2d 198, 200 (Nev. 1967)). To pursue non-judicial

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foreclosure, “the trustee must give notice by recording a notice of default and election to

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sell and serving the grantor with a copy of that notice.” Id. at 255 (citing Nev. Rev. Stat.

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§ 107.080(2)(c) (2012)).3 Next, the grantor has generally thirty-five days to cure the

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deficiency. Id. (citing Nev. Rev. Stat. § 107.080(2)(a) & (b) (2012)). “After at least

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three months have passed from the recording of the notice of default, the trustee must

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give notice of the sale. Id. (citing Nev. Rev. Stat. § 107.080(4) (2012)). Finally, once the

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sale is completed, title vests with the purchaser, but the sale may be voided if the process

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does not substantially comply with the statutory requirements. Id. (citing Nev. Rev. Stat.

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§ 107.080(5) (2012)).

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Here, Defendant argues that the Letter meets the requirements of the notice of

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default and the election of sale—required by statute—and thus qualifies as enforcement

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of a security interest. (Reply 4.) Defendant states that the notice of default must

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specifically describe the deficiency in payment or performance and the owner has thirty-

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five days from the date upon which the notice is recorded and mailed to cure the

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deficiency. (Id. (citing Nev. Rev. Stat. § 107.080(3)).) Defendant argues that “[t]his is

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precisely the information contained in the Letter at issue in the present case.” (Id.)

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Defendant’s argument here is not convincing. If the Court were to accept that the

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Letter was a notice of default then Defendant would have recorded a notice of default and

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election to sell and then mailed “a copy of the notice of default and election to sell” to

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Plaintiff. Nev. Rev. Stat. § 107.080(3) (emphasis added). Here, there are no copies of

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the notice of default and election to sell.

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requirements as a notice of default and election to sell, but are not copies of documents

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filed with the County Recorder. Thus, Defendant cannot rely on mailing the notice of

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default and election of sale, as required by Nevada law, as evidence that it was enforcing

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a security interest and not debt collector under the FDCPA.

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The Letter imitates some of the same

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The Nevada Legislature revised the non-judicial foreclosure statute in mid-2017. See 2017 Nevada
Stat., ch. 571, § 1.5 (S.B. 490). The revisions took effect June 12, 2017. See id. At the time Defendant
mailed the Letter at issue in this case, Nevada law explicitly required the notarized affidavit described in
section II.A.2. The Court reads the Nevada statute as it was at the time of the Letter only to determine
whether Defendant is a debt collector for the purposes of the FDCPA.
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2. Notarized Affidavit Required to Support Notice of Default

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The Court’s conclusion that Defendant’s Letter is not a notice of default and

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election to sell does not end the inquiry. At the time Defendant sent the Letter, Nevada

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law required the beneficiary or trustee to submit to the County Recorder a notarized

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affidavit along with the notice of breach and election of sale. See § 107.080(2)(c) (2017).

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The affidavit must have included, amongst other items, a statement that the “beneficiary

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or its successor in interest, the servicer of the obligation or debt secured by the deed of

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trust or the trustee, or an attorney representing any of those persons,” sent the obligor or

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the borrower a written statement. § 107.080(2)(c)(3) (emphasis added). That written

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statement to the borrower must have included:
(I) The amount of payment required to make good the
deficiency in performance or payment, avoid the exercise of the
power of sale and reinstate the terms and conditions of the
underlying obligation or debt existing before the deficiency in
performance or payment, as of the date of the statement; (II)
The amount in default; (III) The principal amount of the
obligation or debt secured by the deed of trust; (IV) The amount
of accrued interest and late charges; (V) A good faith estimate
of all fees imposed in connection with the exercise of the power
of sale; and (VI) Contact information for obtaining the most
current amounts due and the local or toll-free telephone number
described in subparagraph (4).

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Id. Thus, Nevada law required the trustee, or an attorney representing the trustee, to

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contact the borrower before filing the notice of breach and election of sale with the

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County Recorder.

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Here, Defendant is an attorney representing Westgate Flamingo Bay, LLC and

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Defendant states in its Reply brief that Westgate Flamingo Bay is the trustee of Plaintiff’s

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Deed of Trust. (Reply 3 (citing Ex. A, at 2).) Therefore, Defendant was not only

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authorized but required to contact Plaintiff before it filed the notice of default and

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election of sale with the County Recorder.

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The next question is whether Defendant’s Letter actually complied with section
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107.080(2)(c)(3). The Letter meets the first and second requirements by stating that total

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past due amount is $14,059.16 and that Plaintiff could cure the default by paying that

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same amount. (See Ex. A, at 2.) Defendant’s Letter also meets the sixth element because

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it provided a toll-free number for obtaining the most current amounts due.

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However, there is no statement as to the principal amount of the obligation secured by the

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deed of trust, no statement as to the amount of accrued interest and late charges, and no

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good faith estimate of all fees imposed by the power of sale. (See id.) Because the Letter

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only meets three out of six requirements, it was not in actual compliance with Nevada

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statute.

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(Id.)

The Court next considers whether Defendant’s Letter, if not in actual compliance,
can still be considered enforcing a security interest. In Ho, the Ninth Circuit stated:
Under California’s non-judicial foreclosure statutes, [the
defendant] could not conduct the trustee’s sale until it sent the
notice of default and the notice of sale. If [the defendant] can
administer a trustee’s sale without collecting a debt, it must be
able to maintain that status when it takes the statutorily required
steps to conduct the trustee’s sale. The right to “enforce” the
security interest necessarily implies the right to send the
required notices; to hold otherwise would divorce the notices
from their context.

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858 F.3d at 573 (footnote omitted). The court went on to reason, “[e]nforcement of a

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security interest will often involve communications between the forecloser and the

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consumer. When these communications are limited to the foreclosure process, they do

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not transform foreclosure into debt collection.” Id. at 574.

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Here, under Nevada’s non-judicial foreclosure statute, Defendant could not record

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the notice of default and election of sale until it sent notice to Plaintiff. Defendant’s

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Letter falls within the statutorily required steps that motivated the above quoted language

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in Ho. If the Court were to find Defendant was not enforcing a security interest such a

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finding would contravene the reasoning in Ho. Defects in the Letter do not detract from

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Defendant’s mandate to follow the Nevada statute to enforce Westgate Flamingo Bay’s
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security interest.

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Additionally, if the Court were to find that Defendant’s Letter was not attempting

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to enforce a security interest then such finding would undermine the purpose of Nevada’s

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non-judicial foreclosure scheme. At the time of the Letter, Nevada required a substantial

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compliance standard “with regard to a lender’s duty to provide a borrower with notice of

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a loan’s default and the lender’s election to foreclose.” Schleining v. Cap One, Inc., 326

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P.3d 4, 8 (Nev. 2014) (citing Nev. Rev. Stat. § 107.080(5)).

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Legislature specifically envisioned that the purposes behind NRS 107.080’s notice and

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timing requirements could be achieved even if these requirements were not strictly

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adhered to.” Id. (citing Leyva v. Nat’l Default Servicing Corp., 255 P.3d 1275, 1278

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(Nev. 2011)). The Nevada legislature explicitly required substantial compliance with the

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non-judicial foreclosure scheme, rather than strict compliance.

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militates in Defendant’s favor.

“In other words, the

This consideration

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In sum, Defendant’s attempt to comply with the non-judicial foreclosure process,

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even if actually defective, places Defendant in the realm of enforcing a security interest

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rather than collecting a debt. Nevada statute required Defendant to take certain steps to

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enforce Westgate Flamingo Bay’s security interest. Whether or not those steps actually

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complied with Nevada law does not change the nature of Defendant’s activity, which was

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enforcing a security interest.

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B. Whether Defendant Admitted It Was a Debt Collector

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Plaintiff next argues that Defendant repeatedly admitted in the Letter that it is a

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“Debt Collector.” (Opp’n 14.) Specifically, Defendant’s Letter included language such

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as: “Pursuant to 15 U.S.C. § 1692g (the Fair Debt Collection Practice Act), the Debt

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Collector hereby discloses the following information” and that “the undersigned [i.e.,

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Defendant] is the Debt Collector.” (Ex. A, at 3.) Plaintiff contends the quoted language

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and other similar disclosures further reinforce Defendant’s status as a debt collector.

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Defendant responds that the language stating it was a debt collector is “boilerplate
FDCPA addendum” and “immaterial.”

(Reply 4.)

Further, Defendant argues that

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inclusion of the language does not transform the issuance of notice under Nevada’s non-

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judicial foreclosure process into debt collection. (Id. at 5.) Defendant also cites a federal

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district court opinion that encountered similar FDCPA compliant disclaimers and that

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court determined FDCPA disclaimers were not dispositive to the court’s analysis.

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Derisme v. Hunt Leibert Jacobson P.C., 880 F. Supp. 2d 339, 373 (D. Conn. 2012)

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(collecting cases). Defendant urges a similar result here.

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The Court agrees with other district courts that have encountered a similar issue.

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Even though Defendant is not a debt collector for the broader definition of the FDCPA, it

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is still subject to the provisions of 15 U.S.C. § 1692f(6), which applies to persons

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enforcing a security interest. If Defendant did not include FDCPA notices then it would

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subject itself to potential liability for failing to comply with section 1692f(6). See

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Stamper v. Wilson & Assocs., P.L.L.C., No. 9-cv-270, 2010 WL 1408585, at *9 (E.D.

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Tenn. Mar. 31, 2010) (quoting Chomilo v. Shapiro, Nordmeyer & Zielke, LLP, No. 06-

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3103 (RHK/AJB), 2007 WL 2695795, at *6 (D. Minn. Sept. 12, 2007)). Moreover, if a

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creditor, or a law firm on the creditor’s behalf, included the FDCPA notices then a court

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might find it was holding itself out as a debt collector—just the outcome Plaintiff urges.

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But, if a creditor followed Plaintiff’s advice and a court determined the creditor was not

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enforcing a security interest then the creditor would risk violating provisions of FDCPA

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requiring the disclosures. No matter what path it chose, Defendant’s choice created

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potential legal risk. The Court will not penalize Defendant for attempting to minimize its

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liability. See Chomilo, 2007 WL 2695795, at *6 (arriving at same conclusion).

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Additionally, the Letter contains a bankruptcy notice at the bottom of the second
page that states:
This Letter is being sent to you on behalf of Westgate Flamingo
Bay, LLC to permit Westgate Flamingo Bay, LLC to pursue its
in rem rights only. Westgate Flamingo Bay, LLC is not seeking
the collection of any monies from you, and Westgate Flamingo
Bay, LLC is not seeking to obtain an in personam judgment,
deficiency judgment, or any other type of money judgment
against you. Any statements regarding any amounts due under
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1

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the subject note, or under the subject deed of trust securing
payment of the note, are being made to establish the amount
due to permit Westgate Flamingo Bay, LLC to pursue its in rem
rights against the subject property.

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(Ex. A, at 3 (emphasis omitted).) The FDCPA disclosures cannot be read in isolation.

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The bankruptcy notice states that Westgate Flamingo Bay did not seek recovery against

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Plaintiff personally, but instead sought to pursue its in rem rights. See Stamper, 2010 WL

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1408585, at *9 (“In addition, [the defendant] did not seek recovery against plaintiffs

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personally.”).

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Defendant was attempting to enforce a security interest. The Court finds that the FDCPA

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disclosures in the Letter do not transform the underlying transaction from enforcement of

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a security interest into a debt collection.

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The language in the bankruptcy disclosure supports a finding that

C. Whether Mashiri Applies

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Plaintiff urges the Court to find Mashiri v. Esptein Grinnell & Howell, 845 F.3d

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984 (9th Cir. 2017), controlling. There, the plaintiff was a member of a homeowners’

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association (“HOA”) and a law firm, on behalf of the HOA, sought to collect the

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plaintiff’s overdue assessment fee. Id. at 986. The notice sent to the plaintiff “included a

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warning that failure to pay the assessment fee would result in the HOA recording a lien

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against [the plaintiff’s] property.” Id. The notice went on to state that it was “required

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by section 5660 of the Davis-Stirling Common Interest Development Act, Cal. Civ. Code

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§ 4000 et seq., which governs the collection of overdue homeowners’ association

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assessments.” Id.

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The defendant law firm argued that it was not a debt collector for purposes of the

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broader definition of 15 U.S.C. § 1692a(6) and instead was only enforcing a security

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interest and subject to § 1692f(6). Id. at 989. The Mashiri court determined that the

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defendant was a debt collector and not enforcing a security interest because:

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There was . . .no existing security interest for [the defendant] to
enforce at the time it sent the May Notice because a lien had yet
to be recorded against [the plaintiff’s] property. Rather than
seeking to enforce an existing security interest or lien, the May
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Notice sought to collect [the plaintiff’s] overdue assessment fee
and to make necessary disclosures that would perfect the
HOA’s security interest and permit it to record a lien at a later
date.

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Id. (citation omitted).

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Here, Plaintiff argues that Defendant, like the Mashiri defendant, did not send a

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recorded notice of default to Plaintiff.

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California law would require Defendant to contact the borrower to satisfy the due

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diligence requirements of California Civil Code § 2923.5.4 (Id.) However, Plaintiff

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argues “‘perfect[ing] [a] security interest’ constitutes collection efforts, and no ‘security

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interests’ exists until Defendant records a notice of default.” (Id. (citing Mashiri, 845

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F.3d 989–90).)

(Opp’n 16.)

Plaintiff acknowledges that

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Defendant argues that Mashiri does not control because there was no existing

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security interest in Mashiri. (Reply 5 (citing Mashiri, 845 F.3d at 989).) But, in Ho the

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trustee sought to enforce a secured loan.

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Defendant distinguishes the facts here because Westgate Flamingo Bay already had a

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recorded lien—the Deed of Trust—whereas the Mashiri defendant did not have any

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security interest and needed to send notice to perfect its security interest.

(Id. (citing Mashiri, 845 F.3d at 990).)

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The Court agrees with Defendant that Mashiri is distinguishable because, there, the

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HOA had not recorded a security interest or lien prior to sending the notice. The

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association was taking the steps necessary, under California homeowners’ association

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law, to perfect the security interest. Here, Westgate Flamingo Bay had an existing

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security interest at the time the Letter was sent to Plaintiff. Defendant communicated on

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behalf of the holder of the Deed of Trust, Westgate Flamingo Bay.

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Moreover, the Mashiri court predicated its analysis on the notification

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4

California Civil Code section 2923.5 requires a mortgage servicer or authorized agent to contact a
borrower before recording a notice of default. This provision in some respects is similar to the Nevada
statute previously discussed, see supra section II.A.2. The Court acknowledges that Nevada law applies
to this case; however, both Mashiri and Ho dealt with California law and those cases are distinguishable
by California law.
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1

requirements of the Davis-Stirling Act, which applies to homeowners’ associations like

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the HOA in Mashiri. See 845 F.3d at 989 (citing Cal. Civ. Code § 5660). The Mashiri

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court did not rely on the California non-judicial foreclosure statutes in reaching its

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decision. In contrast, the Ho court relied on the non-judicial foreclosure process outlined

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in California Civil Code § 2924(a)(1) to determine when an entity was enforcing a

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security interest. 858 F.3d at 570–71. Mashiri did not rely on California’s non-judicial

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foreclosure statutes.

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This case fits squarely under Ho, not Mashiri. The critical distinction between

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those cases was the underlying statutory scheme: homeowners’ association vs. non-

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judicial foreclosure as well as whether a security interest existed prior to sending notice.

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Here, Defendant attempted to enforce an already existing security interest and did so

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through the non-judicial foreclosure process. Indeed, Plaintiff identifies California Civil

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Code § 2923.5, which is part of the California non-judicial foreclosure scheme and

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includes similar notice provisions as its Nevada cousin, Nev. Rev. Stat. § 107.080. Both

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statutes require contacting the borrower before recording notice of default. The question

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here is not whether or not the security interest exists—Plaintiff does not dispute the

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existence of Westgate Flamingo Bay’s Deed of Trust. The question is whether Defendant

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attempted to comply with the Nevada non-judicial foreclosure statute.

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answers this question in the affirmative.

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The Court

In sum, the Court finds that Defendant’s Letter was attempting to enforce a

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security interest.

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definition of the FDCPA, see 15 U.S.C. §1692a(6). Accordingly, Plaintiff’s FDCPA

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claim fails. Because the Court finds Defendant is not a debt collector, it does not reach

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the argument whether Defendant’s conduct violated the FDCPA.

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Therefore, Defendant is not a debt collector under the broader

CONCLUSION

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In light of the foregoing, the Court GRANTS Defendant’s Motion to Dismiss,

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(ECF No. 8), and DISMISSES WITHOUT PREJUDICE Plaintiff’s Complaint, (ECF

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No. 1). Plaintiff MAY FILE an amended complaint that addresses the deficiencies in
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1

this Order within twenty-one (21) days of the date on which this Order is electronically

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docketed. Failure to file an amended complaint by this date may result in dismissal of

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this action with prejudice.

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IT IS SO ORDERED.
Dated: March 9, 2018

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