Source: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-cand-3_10-cv-02165/USCOURTS-cand-3_10-cv-02165-1/pdf.json

Nature of Suit Code: 370
Nature of Suit: Other Fraud
Cause of Action: 28:1441 Petition for Removal- Fraud

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NO. C 10-2165 RS

ORDER

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United 

States District 

Court

For the Northern District of California 

*E-Filed 07/20/2010* 

IN THE UNITED STATES DISTRICT COURT 

FOR THE NORTHERN DISTRICT OF CALIFORNIA 

SAN FRANCISCO DIVISION 

SERGEY ZHURAVLEV, et al.,

 Plaintiffs, 

 v. 

BAC HOME LOANS SERVICING, LP, et 

al., 

 Defendants. 

____________________________________/

No. C 10-2165 RS 

ORDER GRANTING IN PART 

DEFENDANTS’ MOTION TO 

DISMISS AND REMANDING TO 

STATE COURT 

I. INTRODUCTION 

This is a Motion to Dismiss arising from a mortgage loan plaintiffs obtained from 

defendants. Defendants BAC Home Loans Servicing (“BAC”), U.S. Bank, and Mortgage 

Electronic Registration Systems, Inc. (“MERS”) join the motion. In their Complaint, the 

Zhuravlevs advance the following five claims: (1) to quiet title; (2) to set aside the Notice of Default 

and substitution of trustee and assignment of Deed of Trust; (3) fraudulent or negligent 

misrepresentation and deceitful practices under California Civil Code § 1709; (4) unfair debt 

collection practices by defendant BAC and MERS in violation of the Fair Debt Collection Practices 

Act (“FDCPA”) and the Rosenthal Fair Debt Collection Practices Act (“RFDCPA”); and (5) unfair 

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NO. C 10-2165 RS 

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business practices under Cal. Bus. Prof. Code § 17200. Plaintiffs included a prayer for declaratory 

and injunctive relief, damages and attorney’s fees. 

II. RELEVANT FACTS 

On June 6, 2007, the Zhuravlevs obtained a $1,000,000 loan from defendants for the 

purchase of a home located in Santa Clara County. Plaintiffs signed an Interest Only Adjustable 

Rate Notice, which was secured by a Deed of Trust on June 13, 2007. Sometime after receiving the 

loan, Mr. Zhuravlev’s business experienced financial hardship, prompting the couple to explore 

applying for a loan modification in order to secure a lower interest fixed-rate loan. Plaintiffs 

maintain that while they were in compliance with payment obligations, they asked defendant BAC 

to consider a short sale of the Subject Property for $1,200,000. Allegedly, a BAC representative 

informed plaintiff that in order to start the loan modification process, or be considered for a short 

sale, plaintiffs needed to be delinquent on their mortgage payments by at least ninety days, and 

submit a letter of hardship to defendants. Plaintiffs claim defendants did not advise them that a 

ninety day delinquency in mortgage payments would trigger the foreclosure process. 

Plaintiffs never successfully modified the loan. On October 7, 2009, defendants recorded a 

Notice of Default with the Santa Clara County Recorders’ office. The Notice states that on 

September 24, 2009, plaintiffs’ account was delinquent in the amount of $74,669. After they 

received the Notice, plaintiffs approached defendants with an offer to short sell the property, but 

defendants denied the offer. This lawsuit ensued. 

III. LEGAL STANDARD 

Federal Rule of Civil Procedure 8(a)(2) demands that a pleading include a “short and plain 

statement of the claim showing that the pleader is entitled to relief.” This mandate does not require 

“detailed factual allegations,” but “demands more than an unadorned, the-defendant-harmed-me 

accusation” or “naked assertion[s] devoid of further factual enhancement.” Ashcroft v. Iqbal, 129 S. 

Ct. 1937, 1949 (2009) (internal quotation marks omitted). “A pleading that offers ‘labels and 

conclusions’ or a ‘formulaic recitation of the elements of a cause of action will not do.’” Id.

(quoting Bell Atl. Corp. v. Twombly, 550 U.S. 544, 555 (2007)). Accordingly, dismissal under Rule 

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12(b)(6) is appropriate where a complaint lacks “sufficient facts to support a cognizable legal 

theory.” Mendiondo v. Centinela Hosp. Med. Ctr., 521 F.3d 1097, 1104 (9th Cir. 2008). When 

considering a motion to dismiss, a court accepts a plaintiff’s factual allegations as true and construes 

the complaint in the light most favorable to the plaintiff. Jenkins v. McKeithen, 395 U.S. 411, 421 

(1969). This tenet does not apply, however, to bare legal conclusions. Twombly, 550 U.S. at 555 

(“Threadbare recitals of the elements of a cause of action, supported by mere conclusory statements, 

do not suffice.”). Even where the plaintiff alleges something more than a bare legal conclusion, 

Twombly requires a statement of a plausible claim for relief. Id. at 544. Weighing a claim’s 

plausibility is ordinarily a task well-suited to the district court but, where the well-pleaded facts do 

not permit the court to infer more than a mere possibility of misconduct, the complaint has not 

shown the pleader is entitled to relief. Iqbal, 129 S. Ct. at 1950. 

IV. DISCUSSION 

A. Unfair Debt Collection Practices Act

BAC and MERS move to dismiss the Zhuravlev’s unfair debt collection practices claims, 

premised on the federal FDCPA. See 15 U.S.C. § 1692, et seq. Defendants persuasively argue that 

neither entity operated as a “debt collector” as contemplated by the federal statutory scheme. 

The FDCPA prohibits debt collectors from engaging in abusive, deceptive and unfair 

practices in the collection of consumer debt. The federal statute defines “debt collector” as “any 

person who uses any instrumentality of interstate commerce or the mails in any business the 

principal purpose of which is the collection of any debts, or who regularly collects or attempts to 

collect, directly or indirectly, debts owed or due or asserted to be owed or due another.” 15 U.S.C. § 

1692a(6). The definition expressly excludes, “any person collecting or attempting to collect any 

debt owed or due or asserted to be owed or due another to the extent such activity . . . concerns a 

debt which was not in default at the time it was obtained by such person . . . .” 15 U.S.C. § 

1692a(6)(f). Here, plaintiffs allege only that “Countrywide and MERS are acting as debt collectors . 

. . .” As alleged and consistent with the attached documents, both BAC and MERS were involved in 

loan origination. That is, they clearly did not obtain any interest after the plaintiffs’ default. 

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While the Ninth Circuit has not yet answered this precise question, numerous courts—both 

in this district and beyond—agree that an entity which forecloses on a property pursuant to a deed of 

trust is not a “debt collector” within the meaning of the FDCPA, so long as it is clear that the entity 

obtained its interest prior to default. See, e.g., Perry v. Stewart Title Co., 756 F.2d 1197, 1208 (5th 

Cir. 1985) (“The legislative history of section 1692a(6) [of the FDCPA] indicates conclusively that 

a debt collector does not include the consumer’s creditors, a mortgage servicing company, or an 

assignee of a debt, as long as the debt was not in default at the time it was assigned.”); Cabellero v. 

Ocwen Loan Serv., No. 09-01021, 2009 WL 1528128, at *1 (N.D. Cal. May 29, 2009) (“[C]reditors, 

mortgagors and mortgage servicing companies are not ‘debt collectors’ and are exempt from 

liability under the [FDCPA] . . . .”); Glover v. Fremont Inv. and Loan, No. 09-03922, 2009 WL 

5114001, at *8 (N.D. Cal. Dec. 18, 2009) (dismissing FDCPA claim as alleged against loan servicer 

on the ground that a servicer was not a debt collector).1 The weight of authority supports 

defendants’ argument that the FDCPA is not applicable here, as neither BAC nor MERS acted as a 

“debt collector.” This claim must therefore be dismissed without leave to amend. 

B. Declination to Exercise Supplemental Jurisdiction

Plaintiffs’ sole federal claim having been dismissed without leave to amend, pursuant to 28 

U.S.C. section 1637(c)(3), this Court declines to exercise supplemental jurisdiction over the 

Zhuravlev’s remaining state law claims (to quiet title, to set aside the trustee sale, for fraudulent 

concealment, for violations of the RFDCPA and for UCL unlawful, fraudulent or unfair business 

practices). See, e.g., Chicago v. Int’l College of Surgeons, 522 U.S. 156, 173 (1997) (“Depending 

on a host of factors, then—including the circumstances of the particular case, the nature of the state 

law claims, the character of the governing state law, and the relationship between the state and 

 

1

 There is also support for defendants’ argument that foreclosure pursuant to a deed of trust does not 

constitute “collection of a debt” within the statutory meaning. See, e.g., Jozinovich v. JP Morgan 

Chase Bank, N.A., No. 09-03326, 2010 WL 234895, at * 6 (N.D. Cal. Jan. 14, 2010) (“[T]he activity 

of foreclosing on [a] property pursuant to a deed of trust is not the collection of a debt within the 

meaning of the FDCPA.”); Izenberg v. ETS Servs., LLC, 589 F. Supp. 1193, 1199 (C.D. Cal. 2008); 

Ines v. Countrywide Home Loans, No. 08-1267, 2008 WL 4791863, at *2 (S.D. Cal. Nov. 3, 2008). 

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federal claims—district courts may decline to exercise jurisdiction over supplemental state law 

claims . . . .”). 

V. CONCLUSION 

 The Zhuravlevs have not advanced a colorable claim under the FDCPA and the defendants’ 

motion to dismiss this claim is granted. Amendment would be futile and this claim is dismissed 

without leave to amend. Because the Zhuravlev’s remaining claims raise issues of state law, the 

case is remanded to the Superior Court of California, County of Santa Clara. 

IT IS SO ORDERED. 

Dated: 07/20/2010 

RICHARD SEEBORG 

UNITED STATES DISTRICT JUDGE 

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