Vien-Phoung Thi Ho v. ReconTrust Co., No. 10-56884 (9th Cir. 2016)
Annotate this CaseAfter plaintiff began missing loan payments on a house she bought in Long Beach, ReconTrust initiated a non-judicial foreclosure. In this case, the lender was Countrywide, the borrower was plaintiff and the trustee was ReconTrust. Plaintiff subsequently filed suit alleging that ReconTrust violated the Fair Debt Collection Practices Act (FDCPA), 15 U.S.C. 1692e(2)(A), by sending her notices that misrepresented the amount of debt she owed. Plaintiff also sought to rescind her mortgage transaction under the Truth in Lending Act (TILA), 15 U.S.C. 1635(a), on the ground that defendants had perpetrated fraud against her. The district court twice dismissed plaintiff's rescission claim without prejudice and then granted ReconTrust's motion to dismiss the FDCPA claims. The court held that actions taken to facilitate a non-judicial foreclosure, such as sending the notice of default and notice of sale, are not attempts to collect “debt” as that term is defined by the FDCPA; the court's holding affirms Hulse v. Ocwen Federal Bank; the court acknowledged that the Fourth and Sixth Circuit declined to follow Hulse; and the notices at issue in this case didn’t request payment from plaintiff, they merely informed plaintiff that the foreclosure process had begun and explained the foreclosure timeline. Therefore, the court affirmed the dismissal of the FDCPA claim. The court also concluded where, as here, the district court dismisses a claim and instructs the plaintiff not to refile the claim unless he includes certain additional allegations that the plaintiff is unable or unwilling to make, the dismissed claim is preserved for appeal even if not repleaded. Therefore, the court remanded to the district court to consider plaintiff's TILA rescission claim in light of Merritt v. Countrywide Fin. Corp.
Court Description: Fair Debt Collection Practices Act. Affirming in part and vacating in part the district court’s dismissal of an action for failure to state a claim, the panel held that the trustee of a California deed of trust securing a real estate loan was not a “debt collector” under the Fair Debt Collection Practices Act. Seeking damages under the FDCPA, the plaintiff alleged that the trustee of the deed of trust on her property sent her a notice of default and a notice of sale that misrepresented the amount of debt she owed. The plaintiff also sought to rescind her mortgage transaction under the Truth in Lending Act. Disagreeing with the Fourth and Sixth Circuits, and agreeing with the California Courts of Appeal, the panel held that the trustee was not a “debt collector” subject to damages * The Honorable Edward R. Korman, Senior District Judge for the U.S. District Court for the Eastern District of New York, sitting by designation. HO V. RECONTRUST CO. 3 under the FDCPA because the trustee was not attempting to collect money from the plaintiff. The panel held that the object of a non-judicial foreclosure in California is to retake and resell the security on the loan. Thus, actions taken to facilitate a non-judicial foreclosure, such as sending the notice of default and notice of sale, are not attempts to collect “debt” as that term is defined by the FDCPA. The panel wrote that following a trustee’s sale, the trustee collects money from the home’s purchaser, not the original borrower. Because the money collected from a trustee’s sale is not money owed by a consumer, it is not “debt.” Accordingly, the foreclosure notices were an enforcement of a security interest, rather than general debt collection under 15 U.S.C. § 1692a(6). Citing Sheriff v. Gillie, 136 S. Ct. 1594 (2016), the panel declined to create a conflict with state foreclosure law in its interpretation of the ambiguous term “debt collector.” Accordingly, the panel affirmed the dismissal of the FDCPA claim. The panel held that even though the district court twice dismissed the plaintiff’s TILA rescission claim and she did not replead it in her third complaint, it was preserved for appeal because the district court instructed her that she would be required to allege the ability to repay the loan in order to state a rescission claim. The panel held that under Merritt v. Countrywide Fin. Corp., 759 F.3d 1023 (9th Cir. 2014), decided after the district court’s dismissal, a mortgagor need not allege the ability to repay in order to state a rescission claim. Accordingly, the panel vacated the dismissal of the TILA claim and remanded for consideration of the claim in light of Merritt. 4 HO V. RECONTRUST CO. The panel affirmed the dismissal of other claims in a concurrently filed memorandum disposition. Judge Korman dissented in part and concurred in part. He wrote that the only reasonable reading of the FDCPA is that a trustee pursuing a non-judicial or judicial foreclosure proceeding is a debt collector because both proceedings are intended to obtain money by forcing the sale of the property being foreclosed upon. He also wrote that the FDCPA does not interfere with California’s arrangement for conducting non-judicial foreclosures in a way that would justify nullifying the protections that the FDCPA provides, and the FDCPA’s preemption section provides ample room for the operation of California law. Judge Korman concurred in the remand to the district court for consideration of the TILA rescission cause of action. HO V. RECONTRUST CO. 5
Some case metadata and case summaries were written with the help of AI, which can produce inaccuracies. You should read the full case before relying on it for legal research purposes.
This site is protected by reCAPTCHA and the Google Privacy Policy and Terms of Service apply.