Source: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-cand-3_16-cv-06088/USCOURTS-cand-3_16-cv-06088-1/pdf.json

Nature of Suit Code: 480
Nature of Suit: Consumer Credit
Cause of Action: 28:1332 Diversity-Petition for Removal

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United States District Court

For the Northern District of California

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IN THE UNITED STATES DISTRICT COURT

FOR THE NORTHERN DISTRICT OF CALIFORNIA

VARINDER SUDHIR,

Plaintiff,

 v.

PHH MORTGAGE CORPORATION

and DOES 1–25, inclusive,

Defendants. /

No. C 16-06088 WHA

ORDER DENYING MOTION

FOR JUDGMENT ON THE

PLEADINGS AS TO 

SECOND CLAIM

INTRODUCTION

In this action challenging defendant’s debt collection and credit reporting practices,

defendant moves for judgment on the pleadings as to the second claim pursuant to FRCP 12(c). 

For the reasons stated below, defendant’s motion is DENIED.

STATEMENT

The following facts are taken from the complaint. Plaintiff Varinder Sudhir owns and

rents two houses that are encumbered by first deeds of trust held by defendant PHH Mortgage

Corporation. Despite Sudhir providing proof of existing insurance on the properties, PHH

purchased forced placed insurance on the properties in January 2015. At the same time, PHH

opened an escrow account, charged the account the insurance premiums, and increased Sudhir’s

monthly mortgage payment to account for the cost of the insurance. 

Case 3:16-cv-06088-WHA Document 27 Filed 01/19/17 Page 1 of 5
United States District Court

For the Northern District of California

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Beginning in January 2015 until the filing of the complaint in state court on January 21,

2016, PHH notified credit reporting agencies that Sudhir’s mortgage payments were thirty days

or more past due, called Sudhir an estimated 600 times demanding payment, and sent letters

and mortgage statements to Sudhir stating the loans were in default, despite Sudhir making the

monthly payments on time and PHH’s assertion that the insurance policies had been canceled. 

Both parties agree that PHH serviced the mortgages, and that the mortgages are not in

default now or when PHH initially acquired them. This motion, as both parties further agree,

turns simply on whether PHH is considered a “debt collector” under California’s Rosenthal Fair

Debt Collection Practices Act even though Sudhir concedes PHH is not a debt collector under

the federal Fair Debt Collection Practices Act.

Under the FDCPA, 15 U.S.C. 1692a:

The term “debt collector” means any person who uses any

instrumentality of interstate commerce . . . 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 to another. . . . 

The term does not include . . . (F) 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 . . . (ii) concerns a debt

which was originated by such a person; [or] (iii) concerns a debt

which was not in default at the time it was obtained by such

person . . . . 

Under the Rosenthal Act, Section 1788.2 of the California Civil Code:

The term “debt collector” means any person who, in the ordinary

course of business, regularly, on behalf of himself or others,

engages in debt collection. The term includes any person who

composes and sells, or offers to compose and sell, forms, letters,

and other collection media used or intended to be used for debt

collection, but does not include an attorney or counselor at law.

ANALYSIS

Our court of appeals has held that “[j]udgment on the pleadings is properly granted

when, accepting all factual allegations in the complaint as true, there is no issue of material

fact in dispute, and the moving party is entitled to judgment as a matter of law.” Chavez v.

United States, 683 F.3d 1102, 1108-09 (9th Cir. 2012). Analysis under Rule 12(c) is

substantially identical to analysis under Rule 12(b)(6) because, under both rules, a court must

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United States District Court

For the Northern District of California

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determine whether the facts alleged in the complaint, taken as true, entitle the plaintiff to a legal

remedy. Ibid.

Sudhir argues PHH is a debt collector under the Rosenthal Act because, unlike the

federal act, it does not exclude persons attempting to collect debts that were not in default when

they were acquired by the alleged debt collector. PHH argues it is not a debt collector because

the definition of a debt collector under the Rosenthal Act is interpreted as coextensive with the

same in the FDCPA, which Sudhir concedes does not apply to PHH. The California authorities

have not addressed the issue. Nor has our court of appeals. Sudhir’s argument is supported by

persuasive district court decisions and a plain reading of the Act as a whole. This order thus

finds a mortgage servicing company may be a debt collector under the Rosenthal Act. 

Sudhir relies on Walters v. Fidelity Mortgage of California, 730 F. Supp. 2d 1185,

1203 (E.D. Cal. Aug. 4, 2010) (Judge Frank Damrell, Jr.). Walters denied the defendant loan

servicer’s motion to dismiss under Rule 12(b)(6) as to the plaintiff’s allegations that her loan

servicer misrepresented additional fees would be charged relating to her mortgage. The decision

held that a loan servicer who regularly billed the plaintiff and collected payments on her

mortgage was a debt collector under the Rosenthal Act because the broad definition of “debt

collector” encompassed “‘any person’ who regularly engages in debt collection.” Ibid.

Sudhir asserts PHH sent letters and mortgage statements demanding payments on the

forced placed insurance that PHH had proof was unnecessary, as well as made 600 phone calls

attempting to collect those wrongful charges. He provided specific dates the letters were sent on

and described what they contained (Compl. at 3–8). Following the Walters decision, this order

finds Sudhir sufficiently pleaded facts demonstrating PHH regularly engaged in debt collection.

PHH argues that the alleged demands for payment do not refer to debts that are “due and

owing” as required by the Rosenthal Act. “Debt collection” is defined as “any act or practice in

connection with the collection of consumer debts.” “Consumer debt” is defined as “money,

property or their equivalent which is due or owing or alleged to be due or owing from a natural

person by reason of a consumer credit transaction.” Cal. Civ. Code § 1788.2. 

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United States District Court

For the Northern District of California

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PHH relies on an opinion by the California Attorney General in 2002, finding that the

phrase “due and owing” refers to “debts that have become delinquent and subject to immediate

collection activities.” 85 Ops. Cal. Atty. Gen. 215 (Oct. 29, 2002). The allegations meet this

definition. PHH takes pains to point out Sudhir did not allege the loans were delinquent and

immediately collectable. That is precisely the point. Sudhir claims the alleged demands for

payment were misrepresentations by PHH, in violation of the Rosenthal Act, because he had

already paid the correct amount. He nonetheless alleged facts sufficient to show PHH acted as

if the debts had become delinquent and subject to immediate collection activities.

PHH separately argues that mortgage servicers should not be considered debt collectors

because the Rosenthal Act mirrors the FDCPA. The published decision PHH relies on is Lal v.

American Home Servicing, Inc., 680 F. Supp. 2d 1218, 1224 (E.D. Cal. Jan. 19, 2010)

(Judge Morrison England, Jr.). The Lal decision found both the Rosenthal Act’s and the

FDCPA’s “intentions were the same and exclusive, and, as such, a loan servicer is not a

debt collector under these acts.” 680 F. Supp. 2d 1218, 1224 (E.D. Cal. Jan. 19, 2010). 

The supporting decisions for this conclusion, all non-controlling, merely claim that absent a

violation of the FDCPA, Rosenthal Act claims fail because the scope of the Rosenthal Act

mirrors the FDCPA. 

The Rosenthal Act does indeed adopt a majority of the FDCPA provisions. 

The Rosenthal Act also, however, provides more guidance in determining the extent of this

mirroring. Under Section 1788.17 of the California Civil Code, the Rosenthal Act incorporates

all of the substantive provisions applicable to debt collectors under the FDCPA, as well as the

remedies for violations of those provisions, 15 U.S.C. 1692b-k. Section 1692a of the federal

act, where debt collector is defined, was one of the few sections of the FDCPA that the

California legislature did not incorporate in the Rosenthal Act. 

The maxim expressio unius est exclusio alterius fits the situation. The express inclusion

of many sections of the federal act, but not the section in question, implies the California

legislature intended that this section not mirror the federal act in this regard. In fact, the

expanded definition of “debt collector” in the Rosenthal Act was invited by the FDCPA’s

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preemption provision, which says “a State law is not inconsistent with this subchapter if the

protection such law affords any consumer is greater than the protection provided by this

subchapter.” 15 U.S.C. 1692n. The California legislature clearly intended and afforded greater

protection to consumers by making the Act applicable to more types of creditors. Therefore, this

order rejects the contention that the definition of debt collector under the Rosenthal Act is just as

restrictive as its counterpart in the FDCPA.

CONCLUSION

For the reasons stated above, the motion for judgment on the pleadings as to the second

claim is DENIED.

IT IS SO ORDERED.

Dated: January 19, 2017. WILLIAM ALSUP

UNITED STATES DISTRICT JUDGE

Case 3:16-cv-06088-WHA Document 27 Filed 01/19/17 Page 5 of 5