HOCHMEYER v. FEIN SUCH KAHN & SHEPARD, P.C. et al

Filing 8

OPINION fld. Signed by Judge Jose L. Linares on 10/27/16. (sr, )

NOT FOR PUBLICATION
UNITED STATES DISTRICT COURT
DISTRICT OF NEW JERSEY
Civil Action No.: 16-453 1 (JLL)

MICHAEL HOCHMEYER.,

OPINION

Plaintiff,
V.

FETN SUCH KHAN & SHEPARD, P.C.;
SELECT PORTFOLIO SERVICES, INC.,

Defendants.

LINARES, District Judge
complaint, filed by
This matter comes before the Court by way of a motion to dismiss the
and Select Portfolio Services,
Defendants Fein Such Khan & Shephard, P.C. (the “Law Firm”)
Inc. (“SPS”) (collectively, “Defendants”).

(ECF No. 4).

Plaintiff Michael Hochmeyer has

opposition (ECF No. 7).
opposed this motion (ECF No. 6), and Defendants have replied to that
l Rule of Civil Procedure
The Court decides this matter without oral argument pursuant to Federa
to dismiss Plaintiffs
78. For the reasons stated herein, the Court grants Defendants’ motion
complaint.
I.

Background1

ge loan for his home in
On May 18, 2006, Plaintiff Michael Hochmeyer refinanced a mortga
Westwood, New Jersey. (Compi.

¶J 3,

7). In connection with the refinancing, Plaintiff executed

No. 1, “Compi.”). for purposes of this
‘The facts as stated herein are taken as alleged in Plaintiff’s Complaint. (ECF
See PhiIhps v. County ofAllegheny, 515 f.3d
Motion to Dismiss, these allegations are accepted by the Court as true.
dismiss under Rule] 12(b)(6), was required to
224, 22$ (3d Cir. 200$) (“The District Court, in deciding a motion [to
ces from the facts alleged in the light most
accept as true all factual allegations in the complaint and draw all inferen
favorable to [the plaintiff].”).

1

a promissory note payable to Decision One Mortgage Company, LLC. (Id.

¶

8). Pursuant to

Paragraph 7 of the note, in the event that Plaintiff defaulted on his mortgage payment, the lender
could exercise its right to accelerate the loan, therefore demanding full payment of any outstanding
principal and interest owed. (Id.

¶

10).

In late 2006, “[d]ue to unforeseen economic circumstances[j Plaintiff defaulted on the
mortgage loan.” (Id.

¶ 11).

Therefore, in early 2007, the lender advised Plaintiff in writing that it

was exercising its right to accelerate the loan. (Id.

¶J

13-14).

A foreclosure action was filed

against Plaintiff on August 23, 2007, in the Superior Court of New Jersey. (Id. ¶16). For reasons
unknown to this Court, that foreclosure action was later dismissed. (Id.

¶ 19).

In the instant action, Plaintiff alleges that the Defendants violated the Fair Debt Collection
Practices Act, 29 U.S.C.

§

1692 (“FDCPA”) vis a vi three separate “communications,” as that term

is defined by the FDCPA.

Specifically, Plaintiff alleges that the following communications

contained empty threats to initiate a time-baiTed debt-collection lawsuit: (1) a September 4, 2015
letter from the Law firm; (2) an October 6, 2015 letter from SPS, and; (3) a March 17, 2016
foreclosure action filed in the Superior Court of New Jersey.
By letter dated September 4, 2015, the Defendant Law Firm advised Plaintiff:
THIS FIRM IS A DEBT COLLECTOR. WE ARE ATTEMPTING TO
COLLECT A DEBT AND ANY INFORMATION OBTAINED WILL BE
USED FOR THAI PURPOSE. THIS NOTICE IS REQURIED BY THE
FEDERAL FAIR DEBT COLLECTION PRACTICES ACT AND DOES
NOT IMPLY THAT THE MORTGAGEE IS ATTEMPTING TO COLLECT
MONEY FROM ANYONE WHO IS NOT AN OBLIGOR ON THE LOAN
OR WHOSE DEBT HAS BEEN DISCHARGED UNDER THE
BANKRUPTCY OR ANY OTHER LAWS OF THE UNITED STATES.
Please be advised that this firm has been retained to represent the above named
mortgage creditor. At this time, no attorney with this firm has personally reviewed
the particular circumstances of your account. However, if you fail to contact this
office, our client may consider additional remedies to recover the balance due.

2

As of the date of this letter, you owe a balance of $1,126,987.41. Because of
interest, late charges, and other charges that may vary from day to day, the amount
due on the day you pay may be greater. Hence, if you pay the amount shown above,
an adjustment may be necessary after we receive your payment, in which event we
will infonTi you before processing your payment.
Unless, within thirty days after receipt of this notice, you dispute the validity of
the debt or any portion thereof, we will assume the debt to be valid. If, within thirty
days after your receipt of this notice, you notify us in writing that the debt or any
portion thereof is disputed, we will obtain a verification of the debt or, if the debt
is founded upon a judgment, a copy of such judgment, and we will mail to you a
copy of such verification or judgment. If the original creditor is different from the
creditor named above, then upon your written request within thirty days after the
receipt of this notice we will provide you with the name and address of the original
creditor. For more detailed payoff information, please submit a written request.
However, if you dispute the debt in writing or if you request proof of the debt
or the name and
address of the original creditor within the thirty day time
period that begins upon receipt of this letter, the law requires that we stop our
collection efforts (through litigation or otherwise) to collect the debt or until we
mail the requested information to you.
This firm is hired to collect on this debt but will only file a foreclosure suit
in New Jersey and will not file suit anywhere outside of New Jersey. The law does
not require that we wait until the end of the thirty-day period before commencing
suit against you in New Jersey to collect this debt except that if, you request proof
of the debt or the name and address of the original creditor within the thirty day
time period that begins upon your receipt of this notice, the law requires that we
stop our collection efforts (through foreclosure in New Jersey) to collect the debt
until we mail the requested information to you.
(Compl., Exh. 3).
Thereafter, Plaintiff received the October 6, 2015 from SPS, the loan servicing company
responsible for collecting Plaintiffs mortgage payments. (Id.

¶J

4, 23). The letter is titled

“NOTICE OF INTENT TO FORECLOSE.” (Id., Exh. 4). The letter proceeds as follows.

The mortgage loan on your property is in default as a result of your failure to make
payments as required by the Note and Deed of Trust or Mortgage (Security Instrument).
We have previously sent you letters and communications regarding this default in an
attempt to resolve this matter. The letter provides information about the default and what
rights you have to cure the default. Select Portfolio Servicing, Inc. ($P$) services your
mortgage loan and has been instructed on behalf of the holder of the promissory note (the
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“Lender”) to pursue remedies under the Security Instrument unless you take action to cure
the default before the Cure Date shown below.
The Letter goes on to state that if the default is not cured, “SPS may accelerate and require that
you pay all amounts owing and secured by the Security Instrument in full, and may take steps to
terminate your ownership in the property by referring your loan to outside counsel to commence a
foreclosure action

.

.

.

.“

further, the letter explains that Plaintiff “Ha[sJ Options to Avoid

Forecisure!,” and notifies Plaintiff that “[i]f[SPS] can reach an agreement to resolve your default,
we will not proceed with and/or commence foreclosure, as long as you comply with the agreement
and make required payments.”
In response to the SPS letter, by letter dated October 14, 2015, Plaintiffs counsel advised
SPS that “any attempt to collect upon the debt in Court is time barred pursuant to N.J.S.A. 12A:3118 which imposes a six year statute of limitations following the acceleration of a debt.” (Id., Exh.
5). Plaintiffs counsel further stated that “[c]omrnencement of the 2007 litigation together with

extra-judicial collection efforts at that time constituted an acceleration of the debt.” (Id.).
Thereafler, on March 17, 2016, the Law Firm filed a foreclosure action against Plaintiff in
the Superior Court of New Jersey. (Id., Exh. 6). The complaint is titled “COMPLAINT IN
FORECLOSURE.” Among other allegations, the foreclosure complaint states:
The obligation aforesaid contained an agreement that if any installment payment of interest
and principal, taxes and/or insurance premiums should remain unpaid for more than (30)
thirty days from the date of the Notice of Default is mailed to the Obligor, the whole
principal sum with all unpaid interest, should, at the option of the above named mortgagee
or its assigns, become immediately due and payable.

The mortgagors, obligors, their grantee or grantees, if any has defaulted in making
their monthly mortgage payment to the Plaintiff herein as required by the terms of the
obligation and mortgage referred to in paragraphs I and 2 above, and said payments have
remained unpaid for more than (30) thirty days from the date of mailing Notice of Default
to the Obligor, and are still unpaid.

4

Plaintiff herein, by reason of said default, elected that the whole unpaid principal
sum due on the aforesaid obligation and with mortgage referred to in Paragraphs 1 and 2
above, with all unpaid interest and advanced made thereon, shall now be due. The date of
default is December 1, 2006.
(Id.

¶ 27, Exh. 6). Accompanying the foreclosure complaint was a notice containing the following

disclosure: “This firm is a debt collector attempting to collect a debt. Any information we obtain
will be used for that purpose. If you have any previously received a discharge in bankruptcy, this
communication is not and should not be construed to be an attempt to collect a debt, but only
enforcement of a lien against the property.” (Id.).
Against this backdrop, Plaintiff instituted this action on July 26, 2016, alleging that Defendants
violated the Fair Debt Collection Practices Act (“fDCPA”), 29 U.S.C.

§ 1692. Plaintiff alleges

that the Law Firm’s September 4, 2015 letter, SPS’s October 6, 2015 letter, and the March 2016
foreclosure complaint (collectively, “the communications”) are communications by debt collectors
that contain false or misleading representations.

Specifically, Plaintiff maintains that the

communications contained “threats to take legal action to enforce a promissory note even though
the right to enforce the debt instrument through legal recourse was time barred.”

(Compi.

¶ 37).

Defendants filed the pending motion to dismiss on September 22, 2016. (ECF No. 4, “Defs.’
Mov. Br.”). Plaintiff opposed this motion on October 3, 2016 (ECF No. 6, “Pl.’s Br.”), and
Defendants replied to same on October 7, 2016 (ECf No. 7, “Defs.’ Reply Br.”). This matter is
now ripe for the Court’s adjudication.
II.

Legal Standard

For a complaint to survive dismissal, it “must contain sufficient factual matter, accepted as
true, to ‘state a claim to relief that is plausible on its face.” Ashcrofl v. Iqbal, 556 U.S. 62, 678
(2009) (citing Bell Ad. Corp. v. Twombty, 550 U.S. 544, 570 (2007)).

In determining the

sufficiency of a complaint, the Court must accept all well-pleaded factual allegations in the
5

complaint as true and draw all reasonable inferences in favor of the non-moving party. See Phillips
v. Cnty. ofAllegheny, 515 F.3d 224, 234 (3d Cir. 200$). Additionally, in evaluating a plaintiffs
claims, generally “a court looks only to the facts alleged in the complaint and its attachments
without reference to other parts of the record.” Jordan v. Fox, Rothschik1 O’Brien & Frankel, 20
f.3d 1250, 1261 (3d Cir. 1994).

III.

Discussion
a. FDCPA Background

The purpose of the FDCPA is “to eliminate abusive debt collection practices by debt collectors,
to insure that those debt collectors who refrain from using abusive debt collection practices are not
competitively disadvantaged, and to promote consistent State action to protect consumers against
debt collection abuses.” 15 U.S.C.

§ 1692(e). When Congress passed the legislation in 1977, it

found that “[a]busive debt collection practices contribute to the number of personal bankruptcies,
to marital instability, to the loss of jobs, and invasions of individual privacy.” Id.

§ 1692(a).

Against this backdrop, the Third Circuit has noted that “[a]s remedial legislation, the FDCPA must
be broadly construed in order to give full effect to these purposes.” Caprio

Healthcare Revenue

Recoveiy Grp., LLC, 709 F.3d 142, 14$ (3d Cir. 2013). Accordingly, the Court must “analyze the

communication giving rise to the FDCPA claim ‘from the perspective of the least sophisticated
debtor.” Kayrnarkv. BankofArnerica, AMA., 783 F.3d 16$, 174 (3d Cir. 2015) (quoting Rosenau
v. Unfi,nd Coip., 539 F.3d 21$, 221 (3d Cir. 200$)). “[W]hile the least sophisticated debtor
standard protects naive consumers, ‘it also prevents liability for bizarre or idiosyncratic
interpretations of collection notices by preserving a quotient of reasonableness and presuming a
basic level of understanding and willingness to read with care.” Brown v. Card Serv. Ctr., 464

6

F.3d 450, 454 (3d Cir. 2006) (quoting Wilson v. Quadramed Corp., 225 F.3d 350, 354 (3d Cir.
2000)).
To state a claim for relief under the FDCPA, “a plaintiff must prove that (1) she is a consumer,
(2) the defendant is a debt collector, (3) the defendant’s challenged practice involves an attempt to
collect a ‘debt’ as the Act defines it, and (4) the defendant has violated a provision of the fDCPA
in attempting to collect the debt.” Douglass v. Convergent Outsourcing, 765 F.3d 299, 303 (3d
Cir. 2014) (citation omitted). Here, Defendants do not dispute that Plaintiff has sufficiently
pleaded the first three elements of his fDCPA claim; rather, the only issue before the Court is
whether Plaintiff has pleaded that Defendants violated the FDCPA in attempting to collect a debt.
b. Parties’ Arguments

With respect to the fourth element of his claim, Plaintiff alleges that Defendants violated
Sections 1692f and 1692e(5) of the Act. Section 1692(f) generally prohibits a debt collector from
“us[ing] any unfair or unconscionable means to collect or attempt to collect a debt.” 15 U.s.c.

§ 1 692f. Section 1 692e(5), more specifically, prohibits a debt collector from making a “threat to
take any action that cannot legally be taken or that is not intended to be taken.”
In this case, Plaintiff alleges that Defendants’ communications contained empty threats to
collect on a debt that was time-barred, in violation of Section 1 692e(5). That is, Plaintiff alleges
that Defendants’ communications threatened to enforce the promissory note even though
enforcement of the note would have been barred under New Jersey’s statute of limitations for
enforcing negotiable instruments. (Compl. ¶37). According to Plaintiff, promissory notes to
secure a residential mortgage are negotiable instruments under New Jersey law, and are therefore
governed by the Uniform Commercial Code (“UCC”). (Pl.’s Br. at 11-12). The UCC provides
that “an action to enforce the obligation of a party to pay a note payable at a definite period of time
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must be commenced within six years after the due date or dates stated in the note or, if a due date

§ 12A:3-118. Plaintiff

is accelerated, within six years after the accelerated due date.” N.J.S.A.

alleges that the filing of the 2007 complaint triggered the acceleration date, and that any lawsuit to
enforce that note was time-barred as of August 22, 2013. (Compl. ¶ 21). Plaintiff argues that each
of the communications, which post-date August 22, 2013, when construed from the viewpoint of
the least sophisticated consumer, “made implicit and explicit threats to file a lawsuit and enforce
the time barred promissory note.” (P1’s. Br. at 9).
For their part, Defendants argue that Plaintiffs claims should be dismissed for failure to state
a claim. According to Defendant, “[f]oundational to Plaintiffs Complaint is the notion that
enforcement of the Note vis-à-vis the 2016 Foreclosure Action is time-barred pursuant to N.J.S.A.
§12A:3-118. (Defs.’ Mov. Br. at 6). However, Defendants define the communications as seeking
to enforce the promissory note by way of bringing a foreclosure actions which, unlike actions to
enforce a negotiable instrument, are not subject to a six-year statute of limitations. According to
Defendants, the six-year statute of limitations relied upon by Plaintiff is inapposite to the case at
bar. Defendants instead argue that “an action to enforce the Note by way of foreclosure on real
estate intended to secure repayment of the Note, as opposed to an action by way of money damages
against a signatory to a promissory note” is governed by a N.J.S.A.

§ 2A:50-56.1, titled “Statute

of limitations relative to residential mortgage foreclosures.” This statute provides:
An action to foreclose a residential mortgage shall not be commenced following the earliest
of:
a. Six years from the date fixed for the making of the last payment or the maturity date
set forth in the mortgage note.
or
b. Thirty-six years from the date of recording of the mortgage..
which default has not been
c. Twenty years from the date on which the debtor defaulted,
cured, as to any of the obligations or covenants contained in the mortgage or in the note
.

.

.

8

.‘

N.J.$.A. §2A:50-56.1.
In short, Defendants argue that “[s]ince the 2016 Foreclosure Action is an action on the
mortgage, not on the Note, the statute of limitations fixed by N.J.$.A. §2A:50-56.1 is applicable
to the 2016 Foreclosure Action, not N.J.S.A. §12A:3-l 18. (Defs.’ Mov. Br. at 9).
The question before the Court is whether, when viewed from the perspective of the least
sophisticated consumer, any of the three communications at issue could reasonably be construed
as containing a threat to sue on a time-barred debt, as opposed to a threat to bring a foreclosure
action. Having carefully reviewed each of the communications, the Court finds that when each
communication is read in its entirety—as the law demands of even the least sophisticated
consumer, see Campuzano-Burgos v. midland Credit Mgrnt., 550 F.3d 294, 299 (3d Cir. 2008)
it is apparent that the communications threaten foreclosure.

—

The Court addresses each

communication in turn.
With respect to the Law Finn’s September 4, 2015 letter, the Court notes that the final
paragraph of the letter makes apparent that any litigation filed will be an action in foreclosure. The
Law Firm explains that it “is hired to collect on this debt but will only file a foreclosure suit in
New Jersey and will not file suit anywhere outside of New Jersey.” (Compi., Exh. 3 at 2)
(emphasis added). The final paragraph also explains that “the law requires we stop our collection
efforts (through foreclosure in New Jersey) to collect the debt until we mail the requested
information to you.” (Id.) (emphasis added). Thus, even the least sophisticated consumer, having
read the Law Finn’s September 4th letter in its entirety, would understand same to contain a threat
to bring a foreclosure action.
As far as SPS’s October 6, 2016 letter, the Court notes that the top of the first page contains
the following language: “NOTICE Of INTENTION TO fORECLOSE.” (Compl., Exh. 4 at
9

1). The letter explains that SPS will “pursue remedies under the Security Instrument unless you
take action to cure the default before the Cure Date shown below.” (Id.). SPS further advises
Plaintiff that he may cure the default, and subsequently explains, under a heading entitled “Possible
Consequences of Default,” that SPS “may take steps to terminate your ownership in the property
by referring your loan to outside counsel to commence a foreclosure action in a court of competent
jurisdiction.” (Id. at 3). Moreover, SPS advises Plaintiff that if an agreement is reached to resolve
his default, SPS “will not proceed with and/or commence foreclosure.
could be any question as to whether the October

6th

.

.

.“

(Id.). Then, lest there

letter threatens a foreclosure action, the letter

provides that “[aJs provided in the Security Instrument and under New Jersey law you have the
right to reinstate your loan even after foreclosure has been initiated and prior to the time that a
final judgment of foreclosure is entered.” (Id.). Given these explicit references to foreclosure, the
Court finds that viewed from the perspective of the least sophisticated consumer, the October

6th

letter contains threats to foreclose on the property rather than a threat to collect on the time-barred
debt.
finally, the Court considers the March 17, 2016 foreclosure action. From the outset, the
Court notes that the filing is conspicuously titled, “COMPLAINT IN FORECLOSURE.”
(Compl., Exh. 6 at 1).

Accompanying the foreclosure complaint is the “foreclosure Case

Information Statement,” which accompanies the filing of foreclosure actions pursuant to New
Jersey Court Rule 4:5-1(b)(1) as well as an “Attorney Certification of Diligent Inquiry to Annex
to Residential Mortgage Foreclosure Complaints” pursuant to New Jersey Court Rule 1:56(c)(1)(E). Additionally, a review of the relief Defendants seek in the foreclosure action provides
further clarification that the State Court action is, truly, one for foreclosure of property. Among
other relief Defendants (who are Plaintiffs in the foreclosure action) request a judgment “that the

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lands described

.

.

.

above be sold according to law to satisfy the amount due to Plaintiff on the

Mortgage” and “[b]arring and foreclosing all of the Defendants, of all equity or redemption in the
aforesaid lands.” Given the style and format of the foreclosure complaint, as well as the relief
sought (namely, the foreclosure of Plaintiffs property), the Court finds that the least reasonable
consumer would construe the March 2016 complaint as an action seeking to foreclose on the
property rather than an action to collect on a promissory note.
In short, the Court agrees with Defendants that the communications at issue in this action
do not, as Plaintiff alleges, contain empty threats to collect on a time-barred debt. Rather, these
communications are more reasonably construed as threating to file a foreclosure action if Plaintiff
failed to cure his default. As Plaintiffs ability to plead the fourth element of his FDCPA claims
rise and fall on his allegations that the communications contain an empty threat to collect on a
time-barred debt, the Court finds that Plaintiff has failed to state a claim for relief. Accordingly,
the Court grants Defendants’ motion to dismiss.
Conclusion

IV.

For the reasons stated above, the Court grants Defendants’ motion to dismiss Plaintiffs
Complaint. An appropriate Order accompanies this Opinion.
DATED:

October

2016

U.S.D.J.

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