Best v. Ocwen Loan Servicing, LLC (2021) · DecisionDepot
Best v. Ocwen Loan Servicing, LLC
California Court of Appeal May 21, 2021 No. E074386Published
Filed 5/21/21
CERTIFIED FOR PARTIAL PUBLICATION*
IN THE COURT OF APPEAL OF THE STATE OF CALIFORNIA
FOURTH APPELLATE DISTRICT
DIVISION TWO
CHARLES W. BEST, JR., et al.,
Plaintiffs and Appellants, E074386
v. (Super.Ct.No. RIC1826349)
OCWEN LOAN SERVICING, LLC et al., OPINION
Defendants and Respondents.
APPEAL from the Superior Court of Riverside County. L. Jackson Lucky IV,
Judge. Affirmed in part and reversed in part.
REQUEST FOR JUDICIAL NOTICE. Granted.
Charles W. Best Jr. and Robbie Johnson Best, Plaintiffs and Appellants in pro.
per.; Yesk Law and Michael Yesk for Plaintiffs and Appellants. [Retained.]
Bryan Cave Leighton Paisner, Sara L. Markert, and Kristin S. Webb for
Defendants and Respondents.
* Pursuant to California Rules of Court, rules 8.1105(b) and 8.1110, this opinion is certified for publication with the exception of parts II, IV, VI, and VII.C-F.
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Plaintiffs Charles W. Best Jr. and Robbie Johnson Best allege that defendants —
which we will call “Deutsche”1 and “Ocwen”2 (collectively the Bank) — have attempted
to collect a debt secured by the Bests’ home, despite having no legal right to do so. They
further allege that, in the process, the Bank has engaged in unlawful, unfair, and
fraudulent debt collection practices. Based on these allegations, they assert six causes of
action, including one under the Rosenthal Fair Debt Collection Practices Act (Rosenthal
The trial court sustained the Bank’s demurrer to the entire complaint on the
ground of res judicata; it ruled that the Bests were asserting the same cause(s) of action as
in a prior federal action that they brought, unsuccessfully, against the Bank.
The Bests appeal. In the nonpublished portion of this opinion, we will hold that,
as to three of the Best’s causes of action — including their Rosenthal Act cause of action
— the trial court erred by sustaining the demurrer based on res judicata. As to the other
three, the Bests do not articulate any reason why res judicata does not apply; thus, they
have forfeited any such contention. (Ko v. Maxim Healthcare Services, Inc. (2020) 58
Cal.App.5th 1144, 1147, fn. 3.)
In the trial court, however, the Bank also demurred on the ground that the
Rosenthal Act does not apply to conduct in connection with a nonjudicial foreclosure. In
1 This entity’s full name is Deutsche Bank National Trust Company, as Trustee for New Century Home Equity Loan Trust, Series 2005-D, Asset Backed Pass- Through Certificates. 2 This entity’s full name is Ocwen Loan Servicing, LLC.
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the published portion of this opinion, we will hold that the Rosenthal Act can apply to a
nonjudicial foreclosure; the lower federal court opinions on which the Bank relies have
been superseded by controlling decisions of the United States Supreme Court, the Ninth
Circuit, and the California Courts of Appeal.
Accordingly, we will affirm in part and reverse in part.
I
STATEMENT OF FACTS
Consistent with the standard of review (see part V, post), we assume that the
following facts, as alleged in the operative complaint or as shown by judicial notice (see
part IV, post), are true.
In 2005, the Bests took out a loan for $555,000, secured by a deed of trust on their
home in Lake Elsinore. The lender, and thus the original beneficiary under the trust deed,
was New Century Mortgage Corporation (New Century).
In March 2009, an assignment was recorded which stated that New Century
assigned the note and trust deed to “Deutsche Bank National Trust Company, trustee for
New Century.”
In November 2009, a second assignment was recorded which stated that
“Deutsche Bank National Trust Company, trustee for New Century” assigned the note
and trust deed to Deutsche.3
3 The Bests alleged that the March and November 2009 assignments conveyed the trust deed but not the note. The assignments themselves, however, stated that they conveyed both the note and the trust deed.
3
In December 2010, due to financial hardship, the Bests stopped making payments
on the loan.
In April 2012, Ocwen notified the Bests that it had become the servicer of the
loan.
In April 2014, a third assignment was recorded which stated that Ocwen, as agent
of New Century, assigned the trust deed — but not the note — to Deutsche.
Meanwhile, in January 2013, a substitution of trustee was recorded which stated
that Ocwen, as agent for Deutsche, named Western Progressive, LLC (Western
Progressive) as trustee. In September 2015, Western Progressive recorded a notice of
default. In November 2018, Western Progressive recorded a notice of trustee’s sale. In
December 2018, the house was sold in a trustee’s sale.
II
THE PRIOR FEDERAL ACTION
In November 2016, the Bests filed an action against Deutsche, Ocwen, and a third
defendant in federal district court.
In 2017, they filed a first amended complaint. It alleged generally that Deutsche
and Ocwen had no interest in the loan and therefore had no right to foreclose. It also
alleged, somewhat more specifically, that the March 2009, November 2009, and April
2014 assignments were each “void” and a “nullity”; “[p]laintiffs adamantly dispute[] the
contents of the Assignment[s] . . . .” Finally, and most specifically, it alleged that there
had been an attempt to securitize the loan by placing it in a trust, which had failed
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because the loan had not been timely or properly assigned to the trust in conformity with
the pooling and servicing agreement governing the trust.
It asserted eleven causes of action: (1) declaratory relief; (2) negligence;
(3) quasi-contract; (4) breach of contract; (5) breach of the implied covenant of good faith
and fair dealing; (6) violation of the California Homeowner Bill of Rights (Civ. Code,
§§ 2924.17, 2924, subd. (a)(6)); (7) failure to give notice of the assignment of a mortgage
(15 U.S.C. § 164l(g)); (8) rescission of a mortgage under the federal Truth in Lending
Act (15 U.S.C. § 1601 et seq.); (9) cancellation of instruments; (10) unfair competition
(Bus. & Prof. Code, § 17200 [UCL]); and (11) an accounting.
The Bank responded with a motion to dismiss. The district court granted the
motion. As to the fourth and fifth causes of action, it granted the motion with leave to
amend, because these claims had not been pleaded with sufficient specificity for the court
to determine whether they were timely. As to all other causes of action, it granted the
motion without leave to amend, based on lack of standing to challenge the allegedly
defective securitization.4
The Bests filed a second amended complaint. Its factual allegations were
substantially similar to those of the first amended complaint. It asserted four causes of
action: (1) breach of contract; (2) breach of the implied covenant of good faith and fair
dealing; (3) violation of federal law governing the taxation of a real estate mortgage
4 As to Robbie Johnson Best, the district court also granted the motion as to the entire complaint based on lack of standing, in that she had no ownership interest in the property.
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investment conduit (26 U.S.C. § 860G(d)(l)); and (4) violation of the Fair Debt
Collection Practices Act (FDCPA) (15 U.S.C. § 1692 et seq.).
Again, the Bank responded with a motion to dismiss. In May 2017, the district
court granted the motion, without leave to amend. As to the first and second causes of
action, it ruled again that these claims were not pleaded with sufficient specificity for the
court to determine whether they were timely. As to the third and fourth causes of action,
it ruled that the Bests had not been given leave to add new causes of action.
The Bests appealed, but the Ninth Circuit affirmed the dismissal.
III
THE PRESENT ACTION
The Bests filed this action in December 2018.
The operative (first amended) complaint alleged that the March 2009, November
2009, and April 2014 assignments were invalid. “Plaintiffs adamantly dispute[] the
contents and truthfulness of” these assignments.
It did not specify why the March 2009 assignment was invalid. It alleged that the
November 2009 assignment was invalid because the March 2009 assignment had been
invalid. It alleged that the April 2014 assignment was invalid for two reasons: (1) the
March and November 2009 assignments had been invalid; and (2) an agent had signed it
without subscribing the name of his principal (see Civ. Code, § 1095).
It further alleged that the January 2013 substitution of trustee was invalid.
“Plaintiffs adamantly dispute the contents of this [substitution of trustee].” It stated three
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reasons: (1) the Bank had no interest in the loan; (2) the beneficiaries had not signed and
recorded a majority action affidavit (Civ. Code, § 2941.9); and (3) an agent had signed it
without adding the name of his principal.
The operative complaint asserted six causes of action: (1) violation of the
cancellation of instruments; and (6) intentional infliction of emotional distress.
The Bank demurred to the first amended complaint, arguing that:
(1) The first cause of action, for violation of the Rosenthal Act, did not allege any
prohibited debt collection practice and was untimely.
(2) The second cause of action, for improper substitution of a trustee (Civ. Code,
§ 2934a, subd. (a)(l)(A)-(C)), failed to allege any statutory violation.
(3) The third cause of action, for unfair competition, did not allege any unlawful,
unfair, or fraudulent business practice and was untimely.
(4) The fourth cause of action, for negligent misrepresentation, failed to allege
misrepresentation with sufficient specificity and was untimely.
(5) The fifth cause of action, for cancellation of instruments, failed to allege that
any of the instruments were void or voidable.
(6) The sixth cause of action, for intentional infliction of emotional distress, failed
to allege severe emotional distress.
(7) The entire complaint was barred by res judicata.
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The trial court sustained the demurrer, without leave to amend, based solely on res
judicata. Accordingly, it entered a judgment of dismissal.
IV
REQUESTS FOR JUDICIAL NOTICE
The Bests contend that the trial court erred by granting the Bank’s request for
judicial notice. They also oppose the Bank’s request for judicial notice in this appeal.
A. Additional Factual and Procedural Background.
1. Request for judicial notice in the trial court.
In support of its demurrer, the Bank requested judicial notice of the following
publicly filed or recorded documents:5
(a) Recorded documents concerning the property:
(a)(1) 2005 trust deed.6
(a)(2) March 2009 assignment of trust deed.
(a)(3) November 2009 assignment of trust deed.
(a)(4) January 2013 substitution of trustee.
(a)(5) April 2014 assignment of trust deed.
(a)(6) 2015 notice of default.
5 The documents were not certified copies and were not authenticated by a declaration or otherwise. The Bests, however, did not object on this ground, nor have they ever claimed that the documents were not what they purport to be. 6 Page 6 is missing; in its place is the first page of some apparently unrelated trust deed.
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(a)(7) 2016 notice of trustee’s sale.
(b) Documents filed in the federal action:
(b)(1) Docket.
(b)(2) Order granting motion to dismiss first amended complaint, in part,
without leave to amend.
(b)(3) Order granting motion to dismiss second amended complaint,
without leave to amend.
(b)(4) Ninth Circuit memorandum opinion affirming the dismissal.
The Bests filed an opposition to this request. They argued that the trial court could
take judicial notice of the recordation or filing of the documents but not of the truth of
their contents. They also argued that the documents were “outside the scope of this
matter . . . .” The trial court nevertheless granted the request.
2. Request for judicial notice on appeal.
The Bank has filed a request for judicial notice on appeal of the following publicly
filed or recorded documents:
(c) Recorded documents concerning the property:
(c)(1) 2016 notice of trustee’s sale.
(c)(2) 2018 trustee’s deed upon sale.
(d) Documents filed in the federal action:
(d)(1) Complaint.
(d)(2) First amended complaint.
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(d)(3) Second amended complaint.
The Bests have filed an opposition to this request. Once again, they argue that we
cannot take judicial notice that the contents of the documents are true, and that the
documents are “outside the four corners of their . . . [c]omplaint.” They also argue that
the notice of trustee’s sale and the trustee’s deed are irrelevant because they were
recorded after the Bests filed their operative complaint in this action. Finally, they argue
that the documents have not been duly authenticated by a witness with personal
knowledge, and hence they do not qualify as business records under Evidence Code
section 1271.
B. Discussion.
The fact that the documents were “outside the four corners” of the Bests’
complaint does not preclude judicial notice. In ruling on a demurrer, a court can consider
matters that are subject to judicial notice, even if they are not alleged in the complaint.
(Code Civ. Proc., § 430.30, subd. (a); Tenet Healthsystem Desert, Inc. v. Blue Cross of
California (2016) 245 Cal.App.4th 821, 834.) To put it another way, “[r]elevant matters
that are properly the subject of judicial notice may be treated as having been pled.
Indeed, “where an allegation is contrary to law or to a fact of which a court may
take judicial notice, it is to be treated as a nullity. [Citation.]” (Taliaferro v. Contra
Costa County (1960) 182 Cal.App.2d 587, 592.)
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1. Request for judicial notice in the trial court.
a. Recorded documents concerning the property.
The trial court properly took judicial notice of the recorded documents concerning
the property. “A recorded [document] is an official act of the executive branch, of which
[a] court may take judicial notice. [Citations.]” (Ragland v. U.S. Bank National Assn.
(2012) 209 Cal.App.4th 182, 194; see also Evid. Code, § 452, subd. (c); Yvanova v. New
Century Mortgage Corp. (2016) 62 Cal.4th 919, 924, fn. 1.)
“‘The hearsay rule applies to statements contained in judicially noticed
documents, and precludes consideration of those statements for their truth unless an
independent hearsay exception exists. [Citation.]’ [Citation.]” (Barri v. Workers’ Comp.
Appeals Bd. (2018) 28 Cal.App.5th 428, 437.) Thus, for example, just because Ocwen
purported to execute the 2014 assignment of trust deed as agent for New Century does
not mean it was authorized to do so.
It appears, however, that the trial court properly took judicial notice that the
recorded documents existed; it did not improperly take judicial notice that the statements
in them were true. It sustained the demurrer based on res judicata. For that purpose, it
did not matter whether any of the statements in the recorded documents were true. At
most, the recorded documents merely fleshed out (or even supported) the Bests’
allegations challenging the validity of those documents.
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b. Documents filed in the federal action.
The trial court also properly took judicial notice of the documents filed in the
federal action. (Evid. Code, § 452, subd. (d)(2).) “‘The court may in its discretion take
judicial notice of any court record in the United States. [Citation.] This includes any
orders, findings of facts and conclusions of law, and judgments within court records.
[Citations.] However, while courts are free to take judicial notice of the existence of each
document in a court file, including the truth of results reached, they may not take judicial
notice of the truth of hearsay statements in decisions and court files.’ [Citation.]” (In re
Vicks (2013) 56 Cal.4th 274, 314.)
Arguably, the statements in the federal docket were admissible hearsay. (Evid.
Code, § 1280.) Even if not, however, the trial court could take judicial notice of their
truth under Evidence Code section 452, subdivision (c), which permits judicial notice of
“[o]fficial acts of the . . . judicial department[] of the United States,” and subdivision (h),
which permits judicial notice of “[f]acts and propositions that are not reasonably subject
to dispute and are capable of immediate and accurate determination by resort to sources
of reasonably indisputable accuracy.” (See In re Cook (2017) 7 Cal.App.5th 393, 401,
rev’d and remanded (2019) 7 Cal.5th 439.)7
The trial court could also take judicial notice of “the truth of results reached” in
the orders and the memorandum opinion (In re Vicks, supra, 56 Cal.4th at p. 314) — in
7 Because the Supreme Court reversed on other grounds, Cook remains citable and persuasive authority on this point. (Cal. Rules of Court, rule 8.1115(e)(2).)
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other words, their legal effect, including what factual or legal issue was before the federal
court and how the federal court ruled on that issue. (See People v. Woodell (1998) 17
Cal.4th 448, 460.) “[E]ven though a factual finding in a prior judicial decision may not
establish the truth of that fact for purposes of judicial notice, the finding itself may be a
proper subject of judicial notice if it has a res judicata or collateral estoppel effect in a
subsequent action.” (Kilroy v. State of California (2004) 119 Cal.App.4th 140, 148.)
“Taking judicial notice of a finding in determining its preclusive effect does not involve a
determination of the finding’s truth.” (Rincon EV Realty LLC v. CP III Rincon Towers,
Inc. (2019) 43 Cal.App.5th 988, 1005.) It does not appear that the trial court did any
more than this.
2. Request for judicial notice on appeal.
The Bank should have filed certified copies of the documents of which it wants us
to take judicial notice. (People v. Preslie (1977) 70 Cal.App.3d 486, 495.) Nevertheless,
we have discretion to take judicial notice of uncertified copies (Hamilton v. Greenwich
1788.16, 1788.17, 1788.30.) “Debt collector” is defined as “any person who, in the
ordinary course of business, regularly, on behalf of that person or others, engages in debt
collection.” (Civ. Code, § 1788.2, subd. (c).) “Debt collection” is defined as “any act or
practice in connection with the collection of consumer debts.” (Id., subd. (b).)
“Consumer debt” is defined as “money, property, or their equivalent, due or owing or
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alleged to be due or owing from a natural person by reason of a consumer credit
transaction.” (Id., subd. (f).) And “consumer credit transaction” is defined as “a
transaction between a natural person and another person in which property, services, or
money is acquired on credit by that natural person from the other person primarily for
personal, family, or household purposes.” (Id., subd. (e).)
The Rosenthal Act is modeled on the federal FDCPA. It incorporates the FDCPA,
so that a violation of the FDCPA is per se a violation of the Rosenthal Act. (Civ. Code,
§ 1788.17.) However, it is more extensive than the FDCPA. For example, the FDCPA
does not apply to creditors seeking to collect their own debts; however, the Rosenthal Act
does, “so long as they do so ‘in the ordinary course of business, regularly.’” (Huy Thanh
Vo v. Nelson & Kennard (E.D. Cal. 2013) 931 F.Supp.2d 1080, 1090, quoting Civ. Code
§ 1788.2, subd. (c).)
The Bank asserts that the Rosenthal Act does not apply to foreclosure on a trust
deed, citing federal district court opinions. There are indeed a host of such opinions,9
9 We list only the published opinions that we have found: Avila v. CitiMortgage, Inc. (D.D.C. 2014) 45 F.Supp.3d 110, 120; Rockridge Trust v. Wells Fargo, N.A. (N.D. Cal. 2013) 985 F.Supp.2d 1110, 1164; Altman v. PNC Mortg. (E.D. Cal. 2012) 850 F.Supp.2d 1057, 1071; Hamilton v. Bank of Blue Valley (E.D. Cal. 2010) 746 F.Supp.2d 1160, 1176-1177; Clark v. Countrywide Home Loans, Inc. (E.D. Cal. 2010) 732 F.Supp.2d 1038, 1048; Jensen v. Quality Loan Service Corp. (E.D. Cal. 2010) 702 F.Supp.2d 1183, 1200; Sipe v. Countrywide Bank (E.D. Cal. 2010) 690 F.Supp.2d 1141, 1151; Saldate v. Wilshire Credit Corp. (E.D. Cal. 2010) 711 F.Supp.2d 1126, 1132; Gardner v. American Home Mortg. Servicing, Inc. (E.D. Cal. 2010) 691 F.Supp.2d 1192, 1198-1199; Castaneda v. Saxon Mortg. Services, Inc. (E.D. Cal. 2009) 687 F.Supp.2d 1191, 1197; Keen v. American Home Mortg. Servicing, Inc. (E.D. Cal. 2009) 664 F.Supp.2d 1086, 1095; Rosal v. First Federal Bank of California (N.D. Cal. 2009) 671 [footnote continued on next page]
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although they were mostly decided during a very short time period — 2008 to 2014.10
However, they have been undermined by subsequent decisions of the Supreme Court, the
Ninth Circuit, and the California Courts of Appeal.
These district court opinions analogized the Rosenthal Act to the federal FDCPA,
and relied on earlier cases holding that the FDCPA did not apply to foreclosure of a trust
deed. (Ines v. Countrywide Home Loans, Inc. (S.D. Cal., Nov. 3, 2008, No.
08CV1267WQH(NLS)) 2008 U.S. Dist. LEXIS 88739, at [6] [“California incorporated
the FDCPA into the [Rosenthal Act . . . .”]; Tina v. Countrywide Home Loans, Inc. (S.D.
Cal., Oct. 30, 2008, No. 08 CV 1233 JM (NLS)) 2008 U.S. Dist. LEXIS 88302, at [19]
[“the Rosenthal Act incorporates the majority of its substantive provisions from the
FDCPA, creating similar substantive protections.”].)
Those earlier FDCPA cases had reasoned that “[f]oreclosing on a trust deed is
distinct from the collection of the obligation to pay money. The FDCPA is intended to
curtail objectionable acts occurring in the process of collecting funds from a debtor. But,
foreclosing on a trust deed is an entirely different path. Payment of funds is not the
object of the foreclosure action. Rather, the lender is foreclosing its interest in the
F.Supp.2d 1111, 1135; Izenberg v. ETS Services, LLC (C.D. Cal. 2008) 589 F.Supp.2d 1193, 1199. 10 A few nonpublished stragglers decided after 2014 engaged in no substantive analysis, merely citing the 2008-2014 cases. (E.g., Kizler v. Budget Finance Company (C.D. Cal., Apr. 1, 2020, No. CV 5:20-0296-DOC-KK) 2020 U.S. Dist. LEXIS 128026, at [7]-[8].)
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property.” (Hulse v. Ocwen Federal Bank, FSB (D. Or. 2002) 195 F.Supp.2d 1188,
1204.)
To the extent that those opinions stated any grounds based on the Rosenthal Act
itself, they were that a debt secured by a trust deed was not a “consumer debt,” i.e., not
taken out “primarily for personal, family, or household purposes” (Civ. Code, § 1788.2,
subds. (e), (f)). (Ricon v. Recontrust Co. (S.D. Cal., Aug. 4, 2009, No. 09CV937-IEG-
JMA) 2009 U.S. Dist. LEXIS 67807, at [9]; Pittman v. Barclays Capital Real Estate, Inc.
(S.D. Cal., Apr. 24, 2009, No. 09 CV 02241 JMAJB) 2009 U.S. Dist. LEXIS 34885, at
[11].)
In 2019, in Obduskey v. McCarthy & Holthus LLP (2019) ____U.S. ___ [139
S.Ct. 1029], the Supreme Court effectively overruled the cases cited above holding that
foreclosure is not debt collection, although it came to a similar result by different
reasoning — it held that a business engaged in nonjudicial foreclosure proceedings is not
a “debt collector” within the meaning of the FDCPA. (Id. at pp. 1033, 1035-1040.)
It relied on a provision of the FDCPA that is significantly different from the
corresponding provision of the Rosenthal Act. The definition of “debt collector” in the
FDCPA provides: “For the purpose of section 1692f(6) of this title, such term also
includes any person who uses any instrumentality of interstate commerce or the mails in
any business the principal purpose of which is the enforcement of security interests.” (15
U.S.C. § 1692a(6).) Section 1692f(6), in turn, contains specific prohibitions applicable
solely to nonjudicial foreclosures. The Supreme Court concluded that, by negative
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implication, “debt collector” did not include a “business the principal purpose of which is
the enforcement of security interests” for purposes of any of the other prohibitions of the
FDCPA. (Obduskey v. McCarthy & Holthus LLP, supra, 139 S.Ct. at pp. 1036-1037.)
In the course of so holding, however, the court also indicated that a loan secured
by a deed of trust is a “‘debt’ . . . primarily for personal, family, or household purposes”
(see 15 U.S.C. § 1692a(5)); moreover, but for the FDCPA’s negative implication to the
contrary, a business engaged in nonjudicial foreclosure proceedings would be a “debt
collector” (see 15 U.S.C. § 1692a(5)). Specifically, it stated:
“[A] home loan is an obligation to pay money, and the purpose of a mortgage is to
secure that obligation. [Citation.] Foreclosure, in turn, is ‘the process in which property
securing a mortgage is sold to pay off the loan balance due.’ [Citation.] In other words,
foreclosure is a means of collecting a debt. And a business pursuing nonjudicial
foreclosures would, under the capacious language of the Act’s primary definition, be one
that ‘regularly collects or attempts to collect, directly or indirectly, debts.’ [Citation.]
“It is true that . . . nonjudicial foreclosure does not seek ‘a payment of money from
the debtor’ but rather from sale of the property itself. [Citation.] But nothing in the
primary definition requires that payment on a debt come ‘from a debtor.’ The statute
speaks simply of the ‘collection of any debts . . . owed or due.’ [Citation.] Moreover, the
provision sweeps in both ‘direc[t]’ and ‘indirec[t]’ debt collection. [Citation.] So, even
if nonjudicial foreclosure were not a direct attempt to collect a debt, because it aims to
collect on a consumer’s obligation by way of enforcing a security interest, it would be an
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indirect attempt to collect a debt.” (Obduskey v. McCarthy & Holthus LLP, supra, 139
S.Ct. 1029, 1036-1037.)
And this makes sense. It seems absurd to say that “[p]ayment of funds is not the
object of the foreclosure action.” (But see Hulse v. Ocwen Federal Bank, FSB, supra,
195 F.Supp.2d at p. 1204.) “[A] creditor’s true objective in foreclosure is satisfaction of
the underlying debt, not obtaining possession of the secured property. . . . [¶] . . .
[F]oreclosed property is sold at public sale, and the proceeds from the sale are then
applied to the outstanding debt. Thus, like any debt collection, the payment of money is
the ultimate result of foreclosure. In foreclosure there merely happens to be an additional
step required to obtain that payment, namely, sale of the secured property. Regardless,
the ultimate result of foreclosure is that the debtor’s obligation is satisfied through the
payment of money.” (Marshall, The Protective Scope of the Fair Debt Collection
Practices Act: Providing Mortgagors the Protection They Deserve from Abusive
Meanwhile, in 2018, Davidson v. Seterus, Inc. (2018) 21 Cal.App.5th 283
(Davidson) held that a loan secured by a trust deed can be a “consumer debt” within the
meaning of the Rosenthal Act. (Id. at pp. 298-300.) This definitive construction of state
law effectively overruled the contrary federal cases. (See also Gilliam v. Levine (9th Cir.
2020) 955 F.3d 1117, 1123 [loan secured by real property, which aunt (as trustee of a
trust) had taken out to repair the home of niece (the beneficiary of the trust), was
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“consumer debt” under the Rosenthal Act].) Here, the Bests specifically allege that they
took out the loan “for personal, family, or household purposes . . . .”
As if Davidson were not enough, our Legislature recently amended the Rosenthal
Act so as to state that: “The term ‘consumer debt’ includes a mortgage debt.” (Civ.
Code, § 1788.2, subd. (f), Stats. 2019, ch. 545, § 2, p. 5004.) This amendment took effect
on January 1, 2020; however, the Legislature stated that it “do[es] not constitute a change
in, but [is] declaratory of, existing law.” (Stats. 2019, ch. 545, § 1, p. 5004.) Labeling an
amendment “declaratory” means, at a minimum, that the Legislature intends it to apply to
existing causes of action. (Western Security Bank v. Superior Court (1997) 15 Cal.4th
232, 244-245.) Hence, the amendment applies to the Bests’ complaint.11
In a fallback argument, the Bank seeks to distinguish the conduct involved in
Davidson, such as harassing phone calls (Davidson., supra, 21 Cal.App.5th at pp. 291-
292), from conduct authorized by the foreclosure statutes, such as recording a document.
Like Chicken Little, it vaguely suggests the sky will fall if the Rosenthal Act is applied so
broadly. However, it suggests no statutory basis for such a distinction. Moreover, it
identifies no actual conflict between the foreclosure statutes and the Rosenthal Act. For
example, while the foreclosure statutes authorize the recordation of a substitution of
trustee (Civ. Code, § 2934a, subd. (a)(1)), they do not authorize or require the
11 At oral argument, counsel for the Bank conceded that a mortgage is a consumer debt, or, at least, that it was not contending that a mortgage is not a consumer debt.
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substitution of trustee to contain a “false representation.” (See 15 U.S.C.A. § 1692e(10);
see also Civ. Code, § 1788.17 [incorporating 15 U.S.C.A. § 1692e].)
At oral argument, counsel for the Bank noted that the FDCPA, as incorporated by
the Rosenthal Act, prohibits a debt collector (with some exceptions) from communicating
“in connection with the collection of any debt, with any person other than the consumer
. . . .” (15 U.S.C.A. § 1692c(b).) Counsel argued that this would prevent a trustee from
giving notice of sale. (See Civ. Code, §§ 2924, subd. (a)(3), 2924f.) However, the
provision of the Rosenthal Act incorporating the FDCPA states, “every debt collector
collecting or attempting to collect a consumer debt shall comply with” the FDCPA. (Civ.
Code, § 1788.17.) As already discussed, under Obduskey, a business engaged in
nonjudicial foreclosure proceedings is not a “debt collector” within the meaning of the
FDCPA and therefore is not forbidden to communicate with third parties. Thus, even
though such a business is a “debt collector” under the Rosenthal Act, it can contact third
parties without violating the FDCPA, and hence without violating the Rosenthal Act. We
therefore conclude that a nonjudicial foreclosure can be “debt collection” by a “debt
collector” so as to trigger the protections of the Rosenthal Act.
Finally, we note that the Bests have alleged violations of the Rosenthal Act that go
beyond the scope of an ordinary foreclosure. These include “unethical mismanagement
of the escrow account” and “refusal to correct accounting errors.” Even those federal
cases that have accepted that foreclosure cannot violate the Rosenthal Act have conceded
that debt collection activities “beyond the scope of the ordinary foreclosure process” can
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violate the Rosenthal Act. (Mulato v. Wells Fargo Bank, N.A. (N.D. Cal. 2014) 76
F.Supp.3d 929, 955; Rockridge Trust v. Wells Fargo, N.A., supra, 985 F.Supp.2d at
pp. 1164-1165; Walters v. Fidelity Mortg. of Cal, Inc. (E.D. Cal. 2010) 730 F.Supp.2d
1185, 1203.)
C. The Statute of Limitations.
The Bank also argues that the Bests’ Rosenthal Act cause of action is time-barred.
The limitations period under the Rosenthal Act is one year. (Civ. Code,
§ 1788.30, subd. (f).) The Bank asserts that the Bests were aware of allegedly unlawful
debt collection practices as early as 2016, when they filed the federal action.12
The discovery rule, applicable to most causes of action, “‘postpones accrual of a
cause of action until the plaintiff discovers, or has reason to discover, the cause of
action.’ [Citations.]” (Aryeh v. Canon Business Solutions, Inc. (2013) 55 Cal.4th 1185,
1192.) “‘[T]he infliction of appreciable and actual harm, however uncertain in amount,
will commence’ the running of the statute of limitations. [Citation.]” (Grisham v. Philip
Morris U.S.A., Inc. (2007) 40 Cal.4th 623, 642.) “‘“‘[W]here an injury, although slight,
is sustained in consequence of the wrongful act of another, and the law affords a remedy
therefor, the statute of limitations attaches at once. It is not material that all the damages
resulting from the act shall have been sustained at that time, and the running of the statute
12 Arguably, the Bests were not demonstrably aware until they filed their second amended complaint in the federal action, which was when they first alleged a cause of action for violation of the FDCPA. Even if so, however, that complaint was filed in March 2017, more than a year before this action was filed, in December 2018.
32
is not postponed by the fact that the actual or substantial damages do not occur until a
later date . . . .’”’ [Citation.]” (Vaca v. Wachovia Mortgage Corp. (2011) 198
Cal.App.4th 737, 745, italics omitted.)
These principles, however, relate to damages that continue to flow from a
“completed act.” (Vaca v. Wachovia Mortgage Corp., supra, 198 Cal.App.4th at p. 745.)
“[S]eparate, recurring invasions of the same right can each trigger their own statute of
limitations.” (Aryeh v. Canon Business Solutions, Inc., supra, 55 Cal.4th at p. 1198.)
“[I]f the expiration of the limitations period following a first breach of duty or instance of
misconduct were treated as sufficient to bar suit for any subsequent breach or
misconduct[,] parties engaged in long-standing misfeasance would thereby obtain
immunity in perpetuity from suit even for recent and ongoing misfeasance.” (Ibid.)
Here, the Bests specifically allege that the Bank violated the Rosenthal Act
“within one year of the filing of the [c]omplaint . . . .” At a minimum, they can recover
any damages flowing from these most recent violations.
In addition, the Bests rely (and relied below) on the continuing violation doctrine.
This doctrine “permits recovery ‘for actions that take place outside the limitations period
if these actions are sufficiently linked to unlawful conduct within the limitations
period[.]’ [Citation.] ‘The key is whether the conduct complained of constitutes a
continuing pattern and course of conduct as opposed to unrelated discrete acts. If there is
a pattern, then the suit is timely if “the action is filed within one year of the most recent
33
[violation]” [citation], and the entire course of conduct is at issue.’ [Citation.]”
(Komarova v. National Credit Acceptance, Inc. (2009) 175 Cal.App.4th 324, 343.)
“Under the appropriate circumstances . . . , the continuing violation doctrine may
apply to [Rosenthal Act] claims.” (Joseph v. J.J. Mac Intyre Companies, L.L.C. (N.D.
Cal. 2003) 281 F.Supp.2d 1156, 1161; accord, Komarova v. National Credit Acceptance,
Inc., supra, 175 Cal.App.4th at p. 344.) “The key is whether the conduct complained of
constitutes a continuing pattern and course of conduct as opposed to unrelated discrete
acts.” (Joseph v. J.J. Mac Intyre Companies, LLC at p. 1161.) If it does, “[a]pplication
of the continuing violation doctrine to these facts is not only logical by way of analogy, it
is entirely consistent with . . . the Rosenthal Act’s broad remedial purpose of protecting
consumers. [Citations.]” (Id. at p. 1162.)
The Bank’s only counter-argument is that “[t]here are no allegations of any
continuing violations”; in support, it cites the entire operative complaint. Actually, the
complaint specifically alleges that the Bank’s violations of the Rosenthal Act “are willful,
knowing, and continuing.” Even without that, its allegations of “numerous” violations,
though the violations take a number of different forms, are sufficient to plead a
continuing pattern and course of conduct for limitations purposes. (See generally
Richards v. CH2M Hill, Inc. (2001) 26 Cal.4th 798, 823.)
D. Unfair Competition.
In demurring to the unfair competition cause of action, the Bank argued that the
Bests failed to allege any unlawful, unfair, or fraudulent conduct. They also argued that
34
this cause of action was time-barred. The Bests contend that the demurrer could not have
been sustained on these grounds.
Unfair competition is defined (as relevant here) as “any unlawful, unfair or
fraudulent business act or practice.” (Bus. & Prof. Code, § 17200.) “Because the statute
is framed in the disjunctive, a business practice need only meet one of the three criteria to
be considered unfair competition. [Citation.]” (McKell v. Washington Mutual, Inc.
(2006) 142 Cal.App.4th 1457, 1471.)
“‘“‘By proscribing “any unlawful” business practice, “section 17200 ‘borrows’
violations of other laws and treats them as unlawful practices” that the unfair competition
law makes independently actionable.’” [Citation.] “Virtually any law — federal, state or
local — can serve as a predicate for a [UCL] action.” [Citation.]’ [Citation.]” (Law
Offices of Mathew Higbee v. Expungement Assistance Services (2013) 214 Cal.App.4th
544, 553.) The Bests adequately alleged violations of the Rosenthal Act (see part VII.B,
ante); hence, they also adequately alleged “unlawful” business practices.
It follows that the demurrer to this cause of action could not be sustained on the
ground that it did not allege any unlawful conduct. We need not decide whether the
Bests adequately alleged any unfair or fraudulent conduct.
The limitations period for unfair competition is four years. (Bus. & Prof. Code
§ 17208.) As the Rosenthal Act cause of action was not time-barred (see part VII.B,
ante), a fortiori the unfair competition cause of action also was not time-barred.
35
E. Cancellation of Instruments.
In demurring to the cause of action for cancellation of instruments, the Bank
argued that the Bests failed to allege any facts showing that the instruments were void or
voidable — i.e., the allegations to this effect were unduly conclusory. The Bests contend
that the demurrer could not have been sustained on this ground.
One of the elements of a cause of action for cancellation of an instrument is that
the instrument is void or voidable. (Civ. Code, § 3412; Thompson v. Ioane (2017) 11
Cal.App.5th 1180, 1193-1194.) The Bests’ allegations that the March 2009 and
November 2009 assignments were invalid were indeed conclusory. However, they did
specifically allege that the January 2013 substitution of trustee and the April 2014
assignment were invalid because they were executed by an agent without subscribing the
name of the principal. They also specifically alleged that the January 2013 substitution
of trustee was invalid because the beneficiaries had not signed and recorded a majority
action affidavit.
These allegations were not conclusory. Because the Bank has never argued
otherwise, we assume, without deciding, that, if true, they would mean that these
instruments are void or voidable. It follows that the demurrer to this cause of action
could not have been sustained on this ground.
F. Wrongful Foreclosure.
The Bests contend that, if we hold that the demurrer was properly sustained, we
should give them leave to amend to state a cause of action for wrongful foreclosure. We
36
are holding, however, that the demurrer should have been overruled, at least in part.
Accordingly, we do not decide this issue. If, on remand, the Bests move for leave to
amend, it will be up to the trial court to decide this issue in the first instance.
VIII
DISPOSITION
The judgment is reversed with respect to the first (Rosenthal Act), third (unfair
competition), and fifth (cancellation of instruments) causes of action. The judgment is
affirmed with respect to the second (improper substitution of trustee), fourth (negligent
misrepresentation), and sixth (intentional infliction of emotional distress) causes of
action. The Bests are awarded costs on appeal.
CERTIFIED FOR PARTIAL PUBLICATION RAMIREZ P. J.
We concur:
MILLER J.
RAPHAEL J.
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AI Brief
AI-generated · verify before citing
Holding. The court held that the Rosenthal Fair Debt Collection Practices Act can apply to nonjudicial foreclosure proceedings, reversing the trial court's contrary ruling. Additionally, the court held that res judicata does not bar claims based on conduct occurring after the final judgment in a prior federal action.
Issues
Whether the Rosenthal Fair Debt Collection Practices Act applies to conduct in connection with a nonjudicial foreclosure.
Whether the trial court erred in sustaining a demurrer based on res judicata regarding claims arising from post-judgment conduct.
Disposition. Affirmed in part and reversed in part.
Quotations verified verbatim against the opinion
“the Rosenthal Act can apply to a nonjudicial foreclosure”
“the lower federal court opinions on which the Bank relies have been superseded by controlling decisions of the United States Supreme Court, the Ninth Circuit, and the California Courts of Appeal.”